What’s a business plan and why do you need one?

When starting a business, some new entrepreneurs simply start selling their product or service to willing customers. While the temptation is great, one should slow down and take time to build upon their idea. When writing out a plan, one can do wonders for the long-term viability of a company. Here is a brief description of what a business plan is, and why every new entrepreneur needs one.

Long or short: One can create a short or long plan, and it will depend on the size and complexity of the organisation. For example, a landscaping company will not need a long and drawn out synopsis of their organisation. On the other hand, a financial services company will need to write out a thorough and detailed strategy.

Make money: The most important part of the plan is how the business will make money and what product and service they will provide to customers. When laying out this step, one does not need to go into explicit detail. However, when a potential investor or partner reads this section, they should have a solid idea on how the company will turn a profit. This step should be easy since a new entrepreneur should have a solid idea on what product or service the organisation will offer.

Structure: Next, one should list the structure of the organisation. This can be easy for a small company with only one or two owners. Of course, one should not skip this step as it will help the organisation avoid problems in the future if there is ever a doubt to the organisational structure. To get started with this step, one only needs to list the owners of the company and their main functions. This should be a straightforward and uncomplicated task and a new company should not have to spend too long setting up this part of their strategy. Of course, one should not just list the very basic information about owners and management. Instead, the plan should list the qualifications of everyone involved.

Current finances: The finances of a business are extremely critical especially when the company wants to attract an investor or partner. When laying out the financials, one must go into explicit detail and list the current cash on hand as well as any profits or losses. If the business is not well-established, it is possible for one to follow this step later. Of course, ideally, one should fill out the financial information now since it will help the entrepreneur avoid any confusion in the future.

Marketing plan: A business cannot succeed without a serious and practical marketing plan that will get results. Without this, most small business owners will fail to attract more than a few customers. In reality, when creating a strategy, the marketing plan is the most important step one must follow. To create a marketing strategy, one must lay out, in explicit detail, how the business plans to attract customers. To interest investors or partners, one should list all strategies that they plan to use. For example, most business owners will use online and offline marketing resources. When writing an impressive and detailed marketing plan, one can have a great chance at success.

Risk: Most entrepreneurs hate thinking about the possibility that their idea will ultimately fail. This is a mistake since a serious investor or potential partner will want to see a risk analysis of the business. For this step, some smart companies outsource this task to someone who possesses the necessary qualifications. Either way, one must include all the potential risks and shortcomings of the plan. Without this, a company will never draw an investment or loan from a lending institution.

Most entrepreneurs will create a concise business plan without realising the full implications. Sadly, when creating a short plan without all the necessary information, one will have a hard time attracting partners and investors. Not only that, the strategy is just as important for current owners. Often, when conflicts or questions arise, owners will need to consult their plan for guidance. Without a doubt, one must develop a serious business plan that includes all the pertinent and necessary information.