Business Plan Basics

A business plan is a vital tool for any business. If you operate or plan to operate a home business, the more you know about business plans the more likely your business will succeed. What is a Business Plan?A business plan is a document that is a valuable tool that can act as a blueprint for your home business. It's essential for getting a business loan, but it's also important even if you don't need outside funding. When properly developed and maintained, a business plan can help you stay focused on where you want your business to go and how you're going to to get there. In that sense, a business plan is very much like a road map to your business.
Do I Need a Business Plan?If you intend to secure outside funding for your business, you can expect a business plan to be a requirement. However, even if you're starting small or have your own resources to fund your business, having a business plan will greatly improve the chances that your home business will succeed. It will also provide you with a blueprint for growing your business. The US Small Business Administration (SBA) estimates that as many as 90 percent of all small businesses fail in the first two years. Those statistics can be very frightening. After all, why would you want to spend a lot of time and effort as well as risk your own money when there is only one chance in ten you're going to survive?
Keep in mind that a large proportion of those who start a business don't know how to plan. They may also not be willing to take the time to create and maintain a solid business plan. While you might be able to succeed without one, being armed with information on how to create a good business plan will give you a considerable leg up in starting a business, keeping it operational, managing your money, and culitivating business growth.
What's in a Business Plan?What you should include in your business plan may vary somewhat, based on the type of business you're operating and the purpose of the plan itself. While general guidelines are available, if the plan is being written primarily to secure outside funding, such as a small business loan, it's not a bad idea to see in advance if the financial institution has any specific requirements it likes to see in its loan applications. If the business plan's purpose is primarily for your own use or the financial institution has no specific requirements, the SBA is an excellent unbiased source of what should be included in a business plan. In a way, they are biased because they act as guarantor of many small business loans. Their suggested business plan outline is as follows:
Executive Summary – A high-level overview of the document that includes information about the history of the business, its objectives, and its product or service offerings. Additionally, it includes an overview of the market for your products or services, your competitive advantage (value proposition), your projected growth, the key members of your business and its funding requirements. Market Analysis – A description of your market, your niche, and the demand for your product or service (supported by documentation). The percentage of market share you envision and why. should present general highlights and conclusions of any marketing research data you may have accumulated, but the full details of your market research should be placed in the Appendix. Company Description - A high level look at how all of the different elements of your business fit together, including information about the nature of your business and the success factors that you feel will make your business successful and consequently, profitable. Organization and Management – Who your key players are along with their experience, expertise, and education level. Who is responsible for the various aspects of your business? How much will you pay them or are you paying them, and what benefits (if any) you provide? Also includes our ownership structure - sole proprietorship, LLC, C corporation, S corporation, etc. Marketing and Sales Strategies – How you will promote your business, how you will get your product or service to your customers, the costs for distribution and promotion, and how you will measure the effectiveness of the methods you plan to use. Include any marketing and advertising strategies and your strategies for busines growth. Products and Services - What are your product and/or service offerings, is there a need for them, and why? Is your product or service already available and being sold, or is it still being developed? What makes your product or service unique? What competitive advantage will your product or service enjoy? Also pricing, legal issues and other barriers are discussed.