Why a Small Business Needs a Business Plan
Running a small business is a combination of perseverance, intuition, grit, and maybe just a little bit of luck. While there is no playbook to ensure your business is successful, a business plan can help guide you along the journey. In fact, companies who write a business plan are almost twice as likely to succeed than businesses who do not.
Here are three reasons why every small business should have a business plan:
- Gives direction: With so many possibilities ahead for your small business, you should narrow down the direction you want to take. Business plans help you define what is most important by prompting you to outline your goals and research the required steps to achieve them.
- Entices investors: Any potential investors for your small business will want to see a business plan. When you have a solid plan written, you can use it as a tool to showcase the vision, mission, and future plans of your company during investor meetings.
- Identifies weaknesses: A business plan can help you avoid mistakes before you make them. These plans require you to dive into each aspect of your business, so you will be able to see where your weaknesses are and what you need to do to improve them before launching. For example, you may have grand social media campaign plans, but no budget to execute them. With a business plan, you can find flaws early and come up with a process to fix them.
How to Create a Business Plan for a Small Business
Business plans require you to think strategically. You start with the current state of your business, then project three to five years out to identify where you want to be heading. Your plan will outline the steps needed to get there.
Here are three tips for creating a business plan:
- Do your homework: First and foremost, do your research to know what you are up against in your chosen market. Investigate how similar companies are performing, how they are messaging themselves, and how you can do better. By figuring out your place in the market, you will be able to create a business plan that fits your objectives.
- Write your company profile: Document all of the details of your business, including your overall goals, any relevant history, what you are selling, your target audience, how you will structure your team, etc. Also, be sure to incorporate your business’ mission into your profile. After all, your mission is what your business is all about, and should be reflected throughout your plan.
- State your reasons: Put your passion and personality into your business plan by explaining why you are starting this company. Whether you want to help make a common household chore easier, skyrocket clients into the digital space, or even just make people smile, your excitement will help make your business plan relatable. It’ll also serve as a reminder for you and your colleagues as you move toward your goals.
What to Include in a Business Plan
Each business plan will vary slightly based on your industry and goals, but there are a handful of common assets to include.
According to the U.S. Small Business Administration, your business plan should have the following:
- Executive summary: Give a brief overview of your company, including your goals, products, existing financing, employees, and where you are headquartered.
- Company description: This should elaborate on the executive summary and dive into the company’s relevant information. Think of this as the who, what, when, where, and why of your business.
- Market research: Showcase where you fit into the current market, and how you’ll stand out from competitors to reach your target audience.
- Organization and management: Lay out how your company will be structured, and who will be on the leadership team.
- Service or product line: Define what you’ll be selling, and how it will fill the needs or wants of consumers.
- Marketing and sales: Highlight the strategies you will take to gain new leads and convert them into customers.
- Funding requests: Illustrate the amount and type of funding you are seeking.
- Financial projections: Forecast how you expect your business to perform over the first one, three, and five years. Tip: Graphs and other charts are strong additions to this section.
- Appendix: Support your research and claims with trusted resources.
As you create your business plan, remember that it should change and grow as your company does. The same plan that you used when you were just a small start-up will not work for you once you evolve into a multi-faceted organization. Take time each year to review your business plan and make any necessary tweaks. Not only does this help you maintain focus on your long-term goals, it’s also a great reminder to continually evaluate and improve your business to make customers happy.