You get some new or would-be business owners who scoff at the idea of preparing a business plan. For the business hobbyist, someone who may only be growing vegetables in their garden for sale to friends and family, perhaps a business plan is not required. But for any business that requires reasonably substantial resources, investing money from your savings account or using other people’s money, then it’s hardly likely that you are going to get away without a business plan.
Not having a business plan is like taking a road trip but not planning beforehand. You don’t have a map, you have no petrol in your tank, you haven’t taken the right things to go with you on your journey and you have a general sense of where you going but no specific idea. Well, if that’s how you like to travel in a spontaneous, free-flowing way, then don’t blame anybody if you get lost along the way and never reach your final destination.
I was helping somebody prepare a business plan the other day. It got me thinking about what are the essential or key elements in a business plan?
A business plan is essentially a planning tool. The larger the scope of your business, the more detailed and extensive your plan would be. An online business selling one product may have less of a comprehensive plan than would a tool hire business or computer retail outlet.
A business plan should have a vision or purpose, which gives direction for where you want the business to be in 2 to 3 years time. Next up, you need to describe your business product or service and the value proposition that you are offering potential customers. Then you need to decide or estimate the size of the business, how much money will be required for investment, estimated selling prices and costs of the product or service, staff needs, equipment and assets needed, a marketing plan (including distribution) sales projections and the form of business ownership.
Included in your business plan would be basic business calculations such as your gross profit, overheads and your break-even point. Doing these business calculations will give you a realistic idea of the viability of your business. It will be time worth spent if you realise that you don’t have the resources needed to make the basic gross profit. Going back to the drawing board and even postponing the start-up of your business until you have sufficient investment funds could prevent a lot of headaches and heartache.
Whatever format you choose for your business plan, it’s worthwhile to have it checked by an experienced business adviser, business coach, mentor or even accountant. This step will give you an opportunity to identify any critical or fatal flaws that you may have overlooked. The value of obtaining third-party, outside opinion from someone who has started and run start-ups could be priceless. But bad advice can be disasterous. Make sure you get two or three opinions before you decide.