Running a business without a strong business plan is like rock climbing blindfolded. Your chances of making it successfully to the top are slim. And the climb up will definitely be risky.
Contrary to popular belief and practice, a business plan is not only a means to securing financing. Instead it is more of a step-by-step guide to running your business and creating the product or service that will make it in the marketplace. And like any other map, yours will have to be created and modified according to your vision for the company, conditions and opportunities in the marketplace, and your business’ current condition.
Whether it’s formal or informal, every business has a plan. The local hair salon may not have formally written down the plan, but before setting up shop, a smart owner would have assessed the need for a shop in that area of town, the ability to attract clients there, the appropriate amount of chairs, whether to hire someone to do the shampooing and sweeping, the cost of utilities, the parking availability for clients, etc. In other words, hundreds of factors should be accounted for. The owner who waits to figure these things out using only trial and error will be lucky to have any customers. A business plan helps to minimize the mistakes that could drive clients away.
How to Start Drafting Your Map
To many people, the concept of writing a business plan for their own business is a daunting one. Perhaps it would appear less daunting to view the process as simply writing the answer to three questions, namely:
- Where are you now?
- Where do you want to be at a future date?
- How will you get there?
THE FIRST QUESTION – ‘Where are you now?’ – must be your starting point. This question seeks to provide a planning base. It looks at your business to establish such things as:
- your business idea
- your current level of sales
- your customer groups
- your products and services
- your pricing policy
- your distribution policy
- your promotional activity
- your overall operation
- your team members
- your finances
Answering the question, “Where are you now?” is often a major stumbling block because most people don’t know where to start. However, the answer is surprisingly simple if you divide your business planning into four key areas: Operational, Marketing, Employees, and Finance. This type of division allows you to analyze your business (or assumed business) and create a solid planning base.
THE SECOND QUESTION – “Where do you want to be at a future date?” is simply asking you to visualize your business operation at a set date in the future. This visualization process is almost identical to the exercise of setting personal objectives. The difference, however, is that the focus here is on business objectives.
THE THIRD QUESTION – “How will you get there?” asks about the steps you need to take in order to achieve the business objectives you have written down. Think hard about these steps or strategies to getting there and write them down as well.
Additional components of a strong business plan:
- What is a reasonable expectation of profitability and when?
- How will the business pay you and any team members?
- What are estimated expenses?
- What is the pricing strategy?
- What is the need for what you are offering and what profit margins can you expect?
While much of this may have occurred to you already, it is very import to write it down. If you ever need to approach a bank or investors, you will need it writing. Making a record of it will also reinforce your vision, give you a reference point for checking your business’ progress and will most likely bring up factors you didn’t consider when creating the plan in your head.
Writing your business plan down:
- Helps you determine and coordinate all aspects of business operations
- Gives you a means to analyze and determine what might be the best change to boost your business out of a stagnant situation
- Assists you in determining the risks and benefits associated with any changes
- Decreases your chances of making a mistake or not considering important factors in your business, and most importantly,
- Dramatically increases your chances of success.
Strong business plans are not only for those just setting out their journey in the marketplace. They are useful when acquiring a new business, forecasting growth, introducing a new product or service, entering a new market, responding to changes in the market or changing a significant aspect of your business.
An experienced and professional CPA like Williams & Kunkel, CPA can help you plan out your business to increase your likelihood of success in the marketplace.
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