When starting your business venture a business plan is a vital tool to have on hand. It helps in maintaining focus throughout their journey and keeps the company’s short-term and long-term goals in hindsight.
Some choose to believe that the act of writing down a business plan has been dead for years, but many business experts agree that having a strategic plan for your business is the safest way to start. Even well-thought-out ideas can turn out utterly useless without including proper execution and implementation steps.
What Is a Business Plan and What Does It Consist Of?
A business plan is a road map that describes your business goals and details how you will accomplish those goals for it to succeed.
Business planning is essential for startups as it allows individuals to break down its elements into meaningful pieces that are easier for you to understand and comprehend. This would most likely include expense budget, milestones, tasks and responsibilities, and expected outcomes.
A smart entrepreneur will pay close attention to how much money the business is bringing in and its expenditure. This comes in handy when you’re planning to recruit new employees or purchase new equipment. Outlining such needs in a solid financial plan helps you assess how much capital your business needs in order to grow and function efficiently.
Business Plan Types
There are three common types of business plans which are used as per the business objectives of a startup:
The Lean Business Plan
A lean plan deals with the formalities required when displaying a plan for a loan or investment. It focuses on your main business strategy, objectives, tools and equipment, budget estimation, and forecasts. They’re used as tools to promote strategic planning and growth within the business.
The lean business plans include more financial data but skip units like company history and the team of management since the focus is mostly on projected sales, expenditure, and cash flow.
One-page business plan
A simple one-page format is outlining your business objective and goals within a single page. Everything you find important is listed in concise points that are easy to interpret and understand by anyone.
This kind of business plan is great for startups that just wish to summarize their concept in the best possible way. Sticking to a single page allows you to re-visit the general model whenever you need it without having to rummage through different pages every time. Similarly, it’s a lot easier to tweak and refine as you come up with new ideas and schemes.
In the same way, it can also be used to introduce the business to potential stakeholders who have limited time to read through a comprehensive business document. This is preferable during first meetings as it provides them with a general idea of your business model. A detailed plan can be prepared later in the future but a one-page plan is a better approach to get your business concept through.
Formal or External Business Plan
Formal business plan documents are normally intended for outsiders to provide comprehensive information about a business and its aim. They’re mostly used to convince investors to fund an enterprise or to support a loan application. This type of plan should be designed to look professional, and pay extra attention to detail in language and formatting.
The formal business plan will explain where and how the funding would be used and what return is expected from their investment. Finally, a detailed list of your skilled team should be included to showcase that you’ve got a strong team to help your business grow.
Why Is Startup Business Plan Important?
A survey conducted by Palo Alto resulted that people who create business plans are twice as likely to succeed than people who don’t. To solidify the reason why business plans are still relevant, we’ve explained the importance of writing a business plan for startups below:
Plotting a Course
Business plans allow individuals the opportunity to think long-term. It outlines the directions to follow, the goals and aims of your business, the expected outcome and other futuristic objectives to help your business grow. Its purpose is to keep entrepreneurs focused through every phase in their business venture and not disrupt the flow.
It also helps in briefing recruits, management teams, and employees as you can share your business objectives and motivate them to work towards those goals.
It’s no secret that businesses can’t function without any operating capital to kick-start their production cycle. Entrepreneurs are often required to take loans from financial institutions to purchase property, get the equipment or hire manpower. But for this to work out the way you want, you need to present an up-to-date business plan to potential financiers. An accurately plotted business plan will highlight all the capital requirements and serve as written proof for the deed. The better the business plan, the higher the chances of securing reliable suppliers.
Identifying Possible Weaknesses
If this is your first startup rodeo then there is a high probability of you encountering several pitfalls in your business venture, which is completely normal. Highs and lows are a part of life and without them; we wouldn’t feel the need for improvement.
A business plan allows you to cut down the chance of consequences so you can focus on other aspects of business operation. It eliminates the spot for unnecessary errors that are time-wasting and highlights areas that can be improved with modern tools and technology. Also, it allows you to recognize which regions are better handled by automated technology and which can be appointed to manpower.
Describing how your business will function and perform in the market is important when dealing with sponsors and investors. A business plan will explain your products and services, your targeted customers, the required funds and what’s necessary for your startup to thrive. It guides you through the initial stages and rotates motivation and focus within the business.
If you’re unable to remember important details, having a business plan on hand will assist you in employing staff and distributing the workload to operate smoothly. For instance, if your business specializes in web design and development services your target audience is individuals looking to launch or revamp websites for their blog or company. When you fail to present any aspect of your business, it can lead to confusion and cost you a financer before you’ve even started running.
The Best Possible Chance to Succeed
Taking time out to thoroughly analyze the elements included in writing the best business plan for your startup is guaranteed to bring you success. It allows you to work through important business details like financing and market planning, so you’re not going in blind.
You will be entering the field knowing your target audience and implementing the best strategies to pique their interest. Having a business plan helps you to present your ideas and concepts to investors, sponsors and potential clients to convince them about your commitment to the enterprise and its success.
Using your business plan as a constant management tool is the best way to obtain benefit from it. For this, your plan must be regularly revised and polished to include updates on current conditions and any new data that you’ve gathered while running your business. You’re constantly learning new things while managing a business like a customer’s response to your services, their likes and dislikes, effective marketing techniques, and affairs that require immediate attention. This keeps you on your toes and keeps you determined to succeed.
It is important to understand that a business plan intended for internal management and strategic planning within the business walls differs in length, detail, and presentation. On the other end of the spectrum, a business plan document meant for outsiders like venture capitalists, will focus on high growth aspects of the business and have a much more sophisticated arrangement.
Ultimately, constructing a startup business plan involves a lot of thought and research. You must focus on its core principles and identify what’s best for effective management and functioning. Providing adequate information about your startup is what attracts angel investors and venture capitalists, you just need to apply the right tone and format in your business plan. While it doesn’t guarantee success, it can help in reducing the likeliness of failures you may encounter in the future and raise capital.
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