Perhaps you experienced a major setback in your career or you decided the 9-to-5 work routine just isn’t for you anymore. Maybe you’ve created an amazing new product or business concept and you are ready to branch out on your own. Whatever your reason for deciding to start your own company, consider creating a business plan to have a blueprint to follow and look back on.
What is a Business Plan and Why You Need One
A business plan is a written description of your business’s future. Your business plan should convey your goals, strategies for meeting goals, potential problems and how to solve them, organizational structure, and the amount of funding needed to finance your business until it breaks even. Of course some types of businesses will require more funding than others. If you are looking to start a dog walking business or tutoring business, for example, you won’t need much to get up and running. On the other hand, if you’re looking to open your own gym or restaurant, you’re going to need a financial boost.
Why do you need a business plan? The U.S. Small Business Administration (SBA) estimates that as many as 90 percent of small businesses fail in the first two years. While you may very well be able to succeed without a business plan, having one will give you a leg up in operations and growth. Consider it your blueprint for success. There are two types of business plans. A formal business plan is a detailed document and is often for the purpose of securing business funding. An informal business plan is like a road map for the business, and may only consist of handwritten notes. However, it will act as a guide for you in the day-to-day operations of the business. Both forms of business plans could be helpful in avoiding becoming another startup business statistic.
Components of a Business Plan
Having a solid business plan could be essential to the success of your new company, but what exactly should be included in the business plan? According to the SBA, when creating a business plan, consider including some of the following components:
- Executive Summary – Include your mission statement, company info, growth highlights, products/services, financial information, and a summary or future plans
- Company Description – When describing your company, make sure it differentiates your business from others. Describe your market and how you are going to meet the needs of the market; explain competitive advantages of your business
- Market Analysis – When creating your own business, it is vital that you research your industry, market, and competitors. Include an industry description/outlook, info about your target market, pricing/gross margin targets, and a competitive analysis
- Financial Projections – This is an essential component of the business plan if you are submitting the plan as a request for funding. Submit data on how you project your company to do within the next five years, with each year including forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets
Keep in mind that a business plan can be as simple or as in-depth as you’d like, but if you are submitting a business plan to secure funding, the more information you provide the better. Creditors will want to know everything there is to know about the prospective company they are considering funding.
Cost of Business Plan
If you decide to take on the task of writing a business plan on your own, Small Business Chronicle says the cost can range from absolutely free to about $100 if you decide to purchase software to aid in the outline and completion of your business plan. If writing a business plan on your own seems daunting, you can hire a business plan provider or consultant. Some may charge a flat fee or by the hour, but you should expect to pay $50 to $150 per hour, with flat-rate packages running $400 to $1,000. Consider what it is you are using your business plan for when gauging what to include and how to go about writing it.
By: Larry Mager of Readybrain.net