Shark Tank is a popular American TV show where aspiring entrepreneurs try to persuade a panel of investors to invest money in their business ideas.
Some of these ideas have great potential for success. These are the ones that are snapped up by the investors.
Some ideas are just plain ridiculous.
And some ideas, although sound, miss that vital ingredient that all investors ask for before they throw their money onto the table – a plan.
Today’s business landscape is highly complex. Technology is changing at the speed of light, social media is creating smarter, more informed customers, and what was commonplace yesterday is redundant today.
In such a situation, jumping headlong into a business without planning for the future is not only foolish, it is suicidal. That’s why it is essential to have a comprehensive business plan before you invest your time and money into a business.
Your business plan will act as a map or blueprint that will guide you through your business’ start-up phase through establishment, expansion and growth. Ideally, it should include all information that can show you the pathway to the future and convince an investor of your business’ potential.
4 reasons you need a business plan
1. To get funding
Unless you’re completely bootstrapped and plan to remain so for the foreseeable future, you will need funding to run your business now and to grow it in future.
However, if all you have is a business idea without a business plan, you will never get funding. This means no bank will accept your loan application, no one will agree to be your business partner and no investor will trust you enough to put money into your venture.
So if you want funding, create a business plan!
2.To qualify your business idea and set goals
Before you actually start your business, you would have done some research on the target audience and competition. You might have done a feasibility study and identified gaps in the market that you can fill with your products or services. You might also have identified the actions you need to take to meet your goals. If you have not understood or formalised these elements, you won’t know where you are, much less how you’re going to get there. A business plan that includes all these elements will provide guidance and show you the way forward.
3. To provide direction to your people
As your business grows, you will need to hire more employees, managers and support staff. Your business plan can provide essential information on your business strategy and culture to your people. It will bring them all on the same page so they know what your goals are and what they need to do as a unit to take the company forward.
4. To manage your finances
As you operate your business, you will need to manage all its financial aspects and create a budget. You will need to balance your books and keep an eye on your liabilities. You will also have to optimise your assets and ensure that your cash flow remains healthy.
Your business plan should have a financial section that can provide the basis of your business budget. It will be useful for managing your cash flow, receivables, depreciating assets, overheads, etc. It will also provide a fairly defined picture of the potential costs of certain business decisions so you can make necessary changes before implementing these ideas.
Elements of a business plan
Of course, no two business plans are the same and there are no hard and fast rules to creating one for your business. However, you might find it useful to understand some of the elements that are common to almost every business plan, regardless of business type, size or industry.
1. Executive summary
A highlight of the most important information about your company such as its size, mission, location, etc.
2. Management Summary
Details about your business structure, who is involved, leadership and how the business is (or will be) managed.
3. Company description
What does the company offer? What do you hope to accomplish? What kind of value do you intend to provide to customers? Do you hold any patents or proprietary technology? These are some of the questions you can answer here.
4. Market analysis
A summary of your industry, competition and target market.
5. Marketing strategy
How you plan to price, promote and sell your products or services.
6. Financial analysis
This section should include details about how you are financing your business now and what will be needed for future growth. Include targets and projects for the first few years of the business as well as an estimate of your ongoing operating expenses. Also include a budget with costs related to staffing, manufacturing, expansion and other business expenses you currently have or foresee.
Types of business plans
Business plans usually fall into two categories—traditional or lean startup/one-page.
A traditional business plan is more comprehensive and usually includes all the details we have highlighted above. Therefore it takes more time to create.
However, your business may not need a traditional business plan. A one-page business plan may be more useful or relevant for you. Although this is easier and less time-consuming to create, you will still need to gather information specific to your business. You should also be prepared to answer questions (especially from potential investors) like:
- What is your company’s vision? What will it look like in one, five or 10 years?
- What is your mission and purpose?
- How will you measure your business’ success?
- What are your goals? Are they SMART?
- What is your unique selling proposition? How are you different from the competition?
- What are your anticipated expenses?
- How much start-up capital will you need and how much of it will be bootstrapped?
- Do you have an action plan? What are the specific actions you need to take now? What are your future milestones?
Tips to create your business plan
A business plan requires serious thought and effort. However, if you know what you want to achieve with your business and why, creating a business plan will not be too difficult.
Here are some tips that will help you in the process:
1. First create an outline and gather information
Before you jump in, identify the elements you need to cover in your plan. Depending on your industry and business type, you may not need to include all the elements we have described earlier. Choose the ones that are most relevant to you and discard the rest.
Gather the required information and then use it to fill in the blanks.
2. Identify potential costs and drawbacks
Your business plan is not only about your future revenues and cash flows. You should also have a good idea of potential costs and expenses, and how you plan to meet them.
This will help you with decision-making so you can make any necessary changes before implementing any (expensive) ideas.
3. Make it a ‘living’ document
A lot of business owners create a business plan because they’re told they ‘need’ one. Then they completely forget about it. A business plan is not meant to be a static document. Perform an annual review of the plan and update it as required. This will give you an opportunity to look back, review your successes and failures, and keep your business on track.
4. Highlight important aspects
If there are any especially interesting aspects of your business, such as its USP or management structure, highlight them. They can help attract financing.
5. Use technology
Plenty of business planning tools and templates are available to help you create a business plan quickly and easily. Many of these tools are free. Explore these tools to streamline the process the first time and for future iterations.
Conclusion
A business plan is more than just a long-winded document to make potential investors happy.
It is a critical document that can – and should – evolve with your business. It will not only tell you where you are, it will also help guide your decisions and show you the pathway to the future. Did you like this post? Would you like create such powerful content for your brand?
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