Crafting your Business Plan
As an aspiring business owner, your business plan is an asset that can make or break your entrepreneurial career. This claim may seem exaggerated, but the value of proper planning should not be understated. This is because, as an entrepreneur, you often find yourself wearing many different hats depending on the time of day. You may begin to feel overwhelmed, which can negatively affect your long-term judgement. Therefore, by setting a course for your business in advance – outlining goals, solidifying an identity, planning an exit – your choices as an entrepreneur can remain grounded and rational even in times of hardship.
So what exactly goes into a business plan that makes it so special? While there is no single, set layout to follow, the Canada Business Network (CBN) has put together a good set of topics worth looking into:
The executive summary, like an essay’s introduction, provides an important snapshot of your business plan. It should be concise, like a written elevator pitch. It should also quickly cover every major topic that your business plan aims to dive into later. Just remember that your executive summary is your first impression; anybody who reads your plan will make immediate judgements about you and your business based on what they saw in the summary. It’s recommended, therefore, that you write your summary after completing the other sections of your plan, as you’ll want the best understanding of your plan possible before you craft your vital first impression.
This may sound like a lot to cover in a small amount of space. While that is the case, it’s important that you really focus on keeping this section compact and easy to read. As your summary is your first impression, you do not want your potential investors to be left feeling bored or tired after reading it. A captive audience will be much more receptive to your ideas, after all. Specifically, the CBN recommends that your summary be less than two pages long.
- What’s the purpose of your business?
- What product will your business supply to prospective customers?
- Why would potential customers come to you over a competitor?
- Are there a lot of different competitors in the area?
Next, you’ll want to discuss the industry that you plan on entering. Is it growing? Is it shrinking? You should also note your own current position, or what stage of the business lifecycle your enterprise is in. If your business is already up and running, document any achievements you have accomplished thus far.
You’ll then want to tackle your business’s competitive advantage; investors will want to know that your business has the necessary tricks up its sleeve to find its own profitable niche within the industry. You’ll also want to do the necessary research on your competitors. Who will you be sharing the industry with? Are they big competitors? How will you compare? Lastly, you’ll want to discuss your business model. While there are many different ways to define a business model, the simplest explanation is that it is how you plan on making money. The main branches of this plan are the prices and costs of the goods and services that your business produces. You’ll want to justify why using your business model is an effective way of making money.
Finally, you’ll want to set some goals for yourself in your growth plan. Be sure to set short and long-term goals, and set when you plan on achieving them. Consider following the SMART system of goal-setting:
- S – Specific – A well-defined, discrete goal that makes sense to the average person.
- M – Measurable – You’re able to know when you’ve completed your goal. You can track your progress.
- A – Agreed Upon – Everybody involved is on board with the potential goal.
- R – Realistic – The goal is possible to do in regards to your resources, knowledge, and time
- T – Time-Based – A set time limit for your goal that is neither too short nor too long.
You should also estimate where you see your business at various years down the road. By setting goals and expectations for your business, you can better gauge where your business is and where you would like your business to be as time passes.
While it’s important to understand your product and your industry, it means nothing if nobody knows that your company is open for business. A plan covering marketing and communication will help prevent that problem. On the marketing end, the goal is to include a fair amount of discussion on the four P’s of the marketing mix:
- Product – How do potential customers benefit from using your product?
- Price – How much will your customers pay for your product?
- Promotion – How will you let the right people know about your business?
- Place (Distribution) – Where will you be operating, or distributing your goods and services?
By outlining those four points, you gain an understanding of what you’re selling, what it’s going to cost, how you’re going to advertise it, and where it’s going to be sold. Do you plan on just bringing in locals with an eye-catching storefront sign? Maybe you could make use of local marketing companies to expand your reach regionally? Is there one product you offer that you think will really bring in new customers? These four P’s are interconnected, and require careful tuning if you wish to reap the greatest reward for your business and its products.
Once you’ve drawn customers to your business, the challenge becomes keeping them satisfied and loyal. Long-term customer retention can be tricky, and it’s worth going over how you plan on handling that in advance. Putting together a Communications Plan is a great start to tackling this goal. Due to the advent of social media, it has become commonplace for businesses to keep an open dialogue with their customers online. Whether you’re alerting your followers about deals, posting daily pictures of your different products, or providing insight on local news stories, it is important to plan and implement a strong web presence for your company. That presence helps you build personal relationships with your customers that don’t go unnoticed.
It’s important to plan your business’s daily and overall operations in advance. Doing this is a great way to estimate what you’re going to need in order to run your business on an average day, month, and year. The CBN even recommends that you understand what you are going to need to run your business for the next 3 to 5 years.
A good place to start is to figure out what your day-to-day operations are going to look like:
- What are your hours of operation?
- Will your store be open year-round?
- If you’re selling a product, how and when will you receive and store shipments from suppliers?
Knowing the ins and outs of your average day at work will do wonders for easing the initial stress of opening your enterprise to the public.
The next step is to figure out the scale and location of your business:
- How large of a facility are you going to need to carry out everything you plan on doing as an entrepreneur?
- Does it need to be located in areas with high foot traffic?
Answering these types of questions will allow you to find the ideal site to house your business, potentially saving money in the long run. Also, be sure to include any relevant documents, like lease agreements or supplier quotations, in your plan.
A SWOT analysis is a strong planning tool that allows businesses to take a careful look at all of their internal strengths and weaknesses along with all of the external opportunities and threats present across their industry. This sort of analysis lets you take mental inventory of your company, showing you where it excels and where it struggles. You’ll get a better bang for your buck if you know how to best exploit your business’ strengths in your industry. You’ll also be better equipped to deal with your business’ shortcomings if they don’t come as surprises.
Now, the caveat of the SWOT analysis is that you have to be honest and even brutal in your judgements. Inflating your strengths and downplaying your weaknesses will only lead to the botched execution of a plan that was flawed from the get-go. Admitting weakness is difficult, but it’s required if you want to start your business off correctly.
A template of a SWOT analysis can be found here.
A human resources plan is necessary if you plan on running your company with the help of employees. It’s important to think about where exactly you’ll need the extra assistance, and how you plan on hiring, training, and retaining the extra help. Below are some questions worth answering in this section of the plan:
- What would an organizational hierarchy chart look like for your business?
- Would your employees need outside training and experience to do their job properly at your enterprise?
- Do you have the resources to handle on-the-job training as necessary?
Be sure to go into detail on what each employee would be doing in their respective positions. By planning this in advance, you may save on costs by finding roles that are unnecessary or redundant to fill. You’ll also avoid the awkward situation of investors pointing out these redundancies before you do. Lastly, don’t forget to consider the costs involved with all of this. Do your best to conclude whether or not an additional employee will provide a net benefit to your business.
Your business’ social responsibility strategy centres itself on what’s called the Triple Bottom Line (TBL) approach – a framework that takes into account the three P’s of a socially responsible enterprise:
- People – A measure of how socially responsible a business is in regards to its surrounding community. Is an enterprise leaving a positive impression on the community in which it’s based? This is also referred to as corporate citizenship.
- Planet – A measure of the amount of effort that a business makes in being environmentally responsible.
- Profit – The traditional measure of how much revenue a company earns compared to the costs it undergoes.
Some entrepreneurs see positive social and environmental impacts as mere niceties that pale in comparison to economic gain, but this is no longer the case. Customers value a business that strikes a balance between all three P’s, and will make their opinions heard with their wallets. Consider including sections such as environmental initiatives, or community contributions in your business plan.
Every business owner should have at least a general understanding of modern information technology, as there are so many more opportunities available for those willing to embrace the information age. For example, by creating an appealing online storefront, you allow your customers to access your business and its products from anywhere, at any time of day. This plan should include the following:
- Any potential e-commerce activities – While online sales can open so many doors for your business, e-commerce activity takes a lot of planning to execute properly. You’ll need to consider setting up online payment, delivery strategies, delivery limits, and routine website maintenance.
- A development plan for your website – A well-planned website with an alluring look will help you attract and retain new customers.
- The hardware and software needed to properly carry out online activities – Cutting-edge software will let you craft a beautiful website that will set you apart from the competition. Powerful, reliable hardware is required to house and process that software.
- Any relationships you may have with IT specialists – A working relationship with a reliable tech guru can make all the difference for your online experience.
The level of convenience offered by a web presence is priceless, which is why you should consider growing one for your business. The planning process for this section should not be forgotten when putting together your plan.
One of the more important sections of your plan, the financial forecast converts your concepts into measurable data. In the case that you are starting a new business, these will all be projections, or estimations. These projections should span three years, while including a more detailed look at the first twelve months. Specifically, you should include the following in your plan:
- Sales Forecast – This is a spreadsheet that projects sales over the course of three years. By documenting projected unit sales, price, and unit costs, you can then calculate sales revenue and sales cost. You can use this information to compare yourself to your industry’s standards.
- Cash flow statements – These statements show the movement of money in and out of your business. All costs and revenues resulting in cash flow should all be included in detail in this section.
- Profit and loss forecast – Also known as an income projection, this section documents your projected profits over the next three years. After calculating your projected sales, expenses, interest, and taxes, how much money are you making? The answer to this question is the main point of this section.
This section will be difficult; without any past numbers to look at, it may seem daunting to put together financial projections reaching as far ahead as three years into the future. Just know that they are simply educated estimations, and are not set in stone. Also, it’s not terrible if your projections don’t match what you’re reporting once your business opens. You can use these noted differences to learn from your mistakes and build on your ability to make strong projections going forward.
While it may not seem necessary at this point in time, it is important that you plan your eventual exit from the industry. By looking so far in advance, you have the time to properly consider all of your exit options well before any decisions are required. I mean, you’re likely going to want to make sure that you’ll be able to get your money out of your business when it’s all said and done, right? Proper planning for the future can help secure that. So what exactly goes into the planning process of an ideal exit? Here are a few questions worth answering for your plan:
- When am I planning on leaving?
- What do I want to do with my business in regards to getting it off my hands? Options you can plan for include:
- Closing up shop and liquidating (essentially selling) all of your assets to other buyers
- Selling/passing down your business as a whole to a friendly buyer (a family member, or a trusted employee)
- How will I determine the value of my business and its assets?
- Do I have plan after everything is dealt with? How much money will I need to live comfortably?
Even if you’re not planning on exiting any time soon, a well-planned exit will help provide you with a destination to steer towards while you’re running your business.
Once you’ve finished putting together your business plan, you’ll want to review it extensively. You’ll be showing your plan to potential investors, so you’ll want to put your best foot forward. Also, try not to shy away from workshopping your plan to friends and family; receiving impartial feedback is a valuable part of the writing process. Remember that the end goal is a concise, easy to read, professional document that clearly outlines every aspect of you and your business. When you’re confident that your plan fits all of those criteria, you’ll be properly prepared to make your entrepreneurial dream a reality.