You’ve Planned for Your Business, But Do You Have an Adequate Business Plan?
Much like the blueprints that help a contractor build a house, your business plan is an essential component of your start-up activities, helping you define where you want your company to be within a few years and how you plan to get there. Business plans can vary from simple, one-page documents to lengthy tomes.
Once created, your business plan is not set in stone. Your company will naturally evolve over time and be influenced by outside factors. As such, successful entrepreneurs consider their business plans to be a work-in-progress, to be updated to reflect changes in the marketplace. The important thing to remember is that a good plan includes only the information you need, nothing more and nothing less.
Some successful entrepreneurs have abandoned the old notion of lengthy business plans containing extraneous information. As the company evolves, much of a comprehensive document may become obsolete and have to be discarded. Or, worse, you might find yourself so invested in the plan itself that you resist changes that may be beneficial to the company. Instead, think of a business plan as the following four items:
- A description of the business and leadership team
- A well-defined target market
- Competitive advantage(s) of your product or service
- Three years of projected financial statements
When you are in the early stages, attempting to secure the first round of capital financing, investors are most concerned with the leadership team and what they are going to do. In later stages, the financial data takes on a more pivotal role. Care should be taken to focus on your target market and the overall concept, rather than getting bogged down in the details of a complicated business plan. Potential investors will be closely examining many areas of your business plan, including the team, target market, product or service you offer and financial projections.
Your Leadership Team
The best start-up business teams include a mix of varied strengths that complement each other. The individual who will be managing the business and developing the products or services offered are of the utmost importance.
The Target Market
Your business plan must describe the target market sufficiently to convince investors that you will have customers and that there is a need for whatever it is you have to sell. Be realistic, and include parameters such as the size of the market and the competition.
What is your competitive advantage? Is it something unique about the product or service your company offers? And if you do have a killer concept, what prevents a competitor from copying it? What is the barrier to entry? If the product or service itself is not unique, be sure to demonstrate how you intend on marketing it in a way that sets it apart from the competition.
Provide a reasonable estimation of what your profit and loss will be over the course of the first few years of business operations. Of course, this estimate is subject to change, but it will provide some guidelines to let investors, and your leadership team, know what milestones you expect to meet along the way.
Above all, make sure you demonstrate to potential investors that you have carefully and realistically thought through your business plan, and that you are prepared to make changes along the way when adjustments are necessary.