5 Keys to Writing an Effective Business PlanFollow these expert tips to minimize stress and maximize the utility of your plan.
A business plan is the roadmap for your business’s success. It outlines the route your business will take to grow revenues and win over the market. It can go a long way toward securing financial assistance from lenders.
Writing a business plan is intimidating for many small business owners, but it doesn’t have to be. The plan can be short, simple and straightforward.
Home in on what’s most important with these tips from business consultant Vicky Methven, small business expert Susan Solovic (author of “The Girls’ Guide to Building a MillionDollar Business” and “It’s Your Biz: The Complete Guide to Becoming Your Own Boss”) and Micah Fraim, CPA and author of “The Little Big Small Business Book.”
Research what a good business plan looks like
“Start with a good example. It is far more cost effective to learn with a leg up,” Methven said.
There are many examples of business plans online. Looking at samples will help you decide what to include and how to structure the document. You may want to include an executive summary, a description of your company and how it’s organized, a market analysis and a marketing and sales plan, along with other information.
The U.S. Small Business Administration offers tips on what to include in each section.
Determine the purpose of your plan
Who is the audience for your plan? Are you writing it to guide your business or to share with a potential investor or bank? The target audience influences how the plan should read.
“Understanding this ahead of time before creating a standard plan will save time and money,” Methven said.
Fraim echoed that notion. “Unless the business plan is going to a bank or lender, a lot of the suggested parts of the plan are just unnecessary. Too often I see business plans with undue emphasis on mission statements and the ‘fluffier’ parts of the business plan. Which is fine, except when they ignore the nuts and bolts of the business and the things that will happen operationally. An entrepreneur cannot ignore the things that will actually affect the business.”
Begin by answering the basic questions
“Answer these questions about your business: Who, what, when, where, how and why? That’s a great way to start,” said Solovic.
Allow yourself to go with your gut — at least initially — to get your ideas down and communicate your passion. Business plans need to include the nuts and bolts, but there is some leeway on how those are presented.
“Don’t be afraid of it. One of the best business plans I ever saw was written on the back of a paper grocery bag,” Solovic said.
Lenders and potential investors will do their research, so don’t project revenues that are unrealistic.
“New business owners, especially first-time business owners, are very optimistic when they create a business plan,” Fraim said. “Invariably I find that revenue growth is projected to be too high and expenses are too low. It’s a little draconian, but I always tell new entrepreneurs to decrease their projected revenue by 50 percent and increase expenses by 30 percent. If the plan still looks somewhat viable that’s a good sign. If it does not, they need to figure out how to have more access to capital/savings to weather the first year or two.”
Remember it’s a living document
“A business plan should be a working document that guides you, not something you stick in the drawer and never look at again,” said Solovic. “As your business grows, you’ll find you’ll be updating your business plan regularly. Make it work for you, not more work for you to do.”
Above all, don’t stress too much over it. Your business plan is there to help you.
“Focus on what really matters,” said Fraim. “Your business plan will be 75 percent shorter and 100 percent more valuable.”