What? No business plan? 5 FOMOs, 10 must-haves!
Whether you are starting or growing your entrepreneurial business, staying in business depends on you creating a clear business plan (BP) . In any small business a well thought out BP is instrumental to creating smoothly run operations and, eventually, profits. A bonus is being able to attract and retain an effective team who understand your business goals, and want to be part of your growth stages. #winning
You can create a traditional multi-page document with scads of detail that will be a good read for any prospective partner, investor or team member. Or you can go lean and mean and take an hour or two to cover the most important points. But, by bypassing the vital step of having any kind of BP that you can communicate internally and externally, you may well miss out on some key business advantages.
1. Manage growth stages well
Think of a BP as a compass to set your business on the right path for growth, and guiding you through each stage of starting and managing your business. Done well, a BP can help prevent your business from failing. You’ll use your BP as the working template for how to structure, run, and grow your new business. If you get your team involved in the planning process, you will have immediate buy-in and full engagement from them.
2. Reach key business milestones
You cannot manage what you do not measure, which is why you need to write down your key milestones. Whether or not you think you need to obtain financing, a good BP forces you to think objectively about the key elements of your business. It will support and inform your decision making, help you to ‘roll with the punches’, and make necessary adjustments as you move ahead with business growth. This will also give you cause to celebrate achievements along the way.
3. Project revenue growth and time to profit
A business plan is a written document about your business that projects three to five years ahead. This is the tool that outlines the path your business intends to take to grow revenue. Done well, you will also be able to calculate time-to-profit. Think of it as a living project for your business rather than a static document. If you break it down into sections in which you plan details for sales and marketing, production, pricing, operations, HR management, finance and accounting, and all your business elements, you will have a good basis to measure your growth and success. You will also know how much moolah you will need to get up and running. #realitycheck https://entreflow.com/forecasting-v-budgeting/
4. Access funding
If you need to get funding, or attract new business partners, this is nigh impossible without a cogent BP. It tells your story. Your BP is the tool that you will use to persuade others that working with you, or investing in your business, is the obvious way to go. Only a well thought out BP will give potential investors confidence that they will see a return on their investment.
5. Plan your exit
Any good plan begins with the end in mind. What if this is a family business – who takes over down the road? When do you plan to retire? What is your exit plan? At Entreflow we’ve seen businesses with no succession plan in place. When the founding generation wants to retire and there is no clear succession plan for other family members, chaos is the result. You can avoid this by outlining your future plans now. Ask us about exit planning. https://entreflow.com/
Top 10 BP elements
A business plan is not cast in stone, and every company is different, so your business plan might look nothing like another entrepreneur’s. You should make it your own, in your own unique way. It must have a clear and accurate summary of your business goals, or no one will read past the first paragraph. Rule #1 is “no fluff”.
This appears first and summarizes what you expect your business to do, why you started it, and your credentials or expertise in your field of business. Most entrepreneurs write this section last, even though it’s generally what interested parties read first. A good executive summary is compelling, concise, and outlines the company’s vision and mission. Naturally it also includes a brief description of its products and/or services, and has the essence of your own personality included.
2. Company Description
Tell the reader about your business, goals and the target audience that you want to serve.Take this opportunity to differentiate your company from potential competitors. Here you need to show all your strengths, your competitive advantage(s), and your unique offer of solutions for your customers’ needs.
3. Market Analysis
This is your time to show that you completely understand the industry you’re in, and why you can serve your clients better than anyone else. It’s where your well-researched data and statistics are used to illustrate industry trends and happenings. You have the chance to comment on what other businesses are doing (successfully or badly). Your analysis must also comment on the demographics of your target clients. It’s not a descriptive marketing plan, it’s data driven analysis.
4. Competitive Analysis
Compare yourself, objectively, with direct and indirect competitors. Here, you would do some form of SWOT analysis (internal strengths and weaknesses, external opportunities and threats). And if there are any issues that could prevent you from jumping into the market, like high upfront costs, this is where you will need to be forthcoming. The competitive analysis will be part of the market analysis section. Ask us about the “Porter’s 5 Forces” for competitors: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
5. Description of Management and Organization
Your business must also outline how your organization is set up. Even if you are wearing far too many hats today, it’s crucial to focus on roles, and responsibilities so that you can demonstrate how you’ve got the organization figured out already. If you have a team, you would introduce your company managers here, again focusing on summarizing skills required and primary job responsibilities. An organization chart is the most effective tool here. Include the structure of the business – partnership, sole proprietorship, incorporated – and if you have a board of directors or advisors, with their descriptions. Another key part of this section is to describe the systems implementations you will be undertaking to demonstrate you have all your bases covered, and are moving with the times.
6. What you’re providing
You will need a detailed breakdown of your products and services. Create a full description about the products and services on offer, how they meet current and future demands. Include everyone in the supply chain, detail the costs of creating your products, and the revenue you expect to generate. If you have something unique that you want to protect, discuss patents and copyright concerns in this section.
7. Marketing Plan
This is where you describe how you intend to get your products and services in front of your target customers. Break down here the steps that you will take to promote your products and the budget that you will need to implement your strategies. Ask us for the 7 Ps of marketing! https://entreflow.com/what-are-the-4-ps-of-marketing/
8. Sales Strategy
How do you plan to sell the products that you are creating, or provide the services that you intend to offer? This is another section that needs to be detailed, numeric, and really specific. For example, how many salespeople do you need and when? What are, and how will you find, the right skills, and how will you onboard your new hires. What are your sales objectives in years 1, 2 and 3? How will you support and remunerate the sales team to achieve those goals?
9. Request for Funding
If you need funding, either now or at some predictable future point to complete or advance other projects, this section focuses on the amount of money that you need and how you plan to use the capital you are requesting. A clear timeline with stages for funding requests will help your cause greatly.
10. Financial Projections
This final – and possibly most important section – details your financial goals and expectations based on your in-depth market research and analysis. This is not an area to skimp on, as your potential investors or business partners will want to go through this with a fine-tooth comb. Include your planned revenue for the first 12 months, and your annual projected earnings for the second, third, fourth and fifth years of business. Chances are you’re trying to perform all of the “C” roles yourself, and don’t have all the skills required to do any of them well. For example, having a qualified CFO, either full time or fractional, to get your finances solid, is likely one of the most crucial roles to consider hiring today! A qualified CFO will be able to go all-out here, and with supporting figures predict the amount of time to reach profitability. Done well, this section will have investors clamoring to get skin in your game. (If you’re trying to apply for a personal or a small business loan, you can always add an appendix or another separate section that provides additional financial or background information about your own situation.) Entreflow specializes in interim CFO services. Ask us how we can help you today. https://entreflow.com/
Planning Is Crucial
At Entreflow, we involve our team in the planning process, and we encourage them not to hold back. When you include your team, be sure to integrate deadlines, define roles and responsibilities clearly, to make your expectations known. As you create your BP, also plan for benchmarks that will force you to stop and evaluate how the plan is doing. You will be able to measure your successes, and make planned adjustments as you go, as well as milestones that your employees can celebrate.
Finally, here are a few pitfalls that may creep in if you’re rigid in your approach, write up a plan, deem it to be cast in stone, and never look at it again, or become unwilling to make any adjustments to it as markets and business needs change. For example, who would have predicted two years ago that we’d be locked in a global pandemic in the middle of 2021? A BP is a living, evolving document and will support solid growth of your business over the years if you revisit it regularly.
Pitfalls of an overly rigid business plan:
- Inflexibility – a feeling that you must adhere to the plan and never deviate
- Discouraging creativity, innovation, initiative and experimentation after the plan is set
- Breeding a false sense of security and tunnel vision, stemming from putting too much stock in the plan and not seeing or reacting to changing conditions
- Blinding employees to opportunities that were not foreseen and addressed
- being a time-consuming process, requiring research, analysis and interpretation
- Being expensive, drawing resources away from a business when they could be used on other things
- Being rendered obsolete or irrelevant
Do you need help with organizing a business plan and managing your finances? At Entreflow, we make it our mission to get to know our clients on a personal level and help achieve their business goals. Want to make a difference to your business? Contact us at email@example.com.