How does a business or entrepreneur go about creating a smart, strategic business plan, either for a brand new company or one that’s been in business for years? The business planning process starts with a clear vision and then breaks down into increasingly detailed components, taking into account available resources as well as company values. Following the steps of a strategic planning process helps increase the likelihood of the business’s success.
The Business Planning Process
There are several steps in planning a business, and a business plan should articulate the vision of its owner, CEO or board for its immediate and long-term future. The vision answers the question, “Where would you like your business to be in three-to-five years?” It’s not quite a mission statement but it should align with it.
Keep in mind the strategic plan should be flexible and a “living document,” responsive to changes in the economy, market and business itself. It should also be simple enough to be understood and implemented without significant amounts of training or explanation.
Once you have the vision outlined, you can proceed with the company planning process. Continuing with the end in mind helps frame the content of the written plan. Business plan documents can serve many different purposes. A business plan designed to seek venture capital funding may look very different from an internal plan document designed to help guide the company’s next steps.
Research Your Market and Products
Once the vision has been identified, the company planning process starts with a thorough understanding of your business, its potential market, product or service lines and prospective customers. It’s imperative that you know these aspects of your business intimately, in as much detail as possible.
To gather this information, read as much as you can find about your industry, its leaders and the companies who will be your prime competitors. Explore whether your prospective geographic market will support your planned products and services by comparing it with the geographic markets of industry leaders.
Fact-gathering can be time and labor intensive, but there is no substitute for this level of awareness and understanding. Failure to adequately research can result in insufficient resources being budgeted, overspending on certain functions and loss of key employees at critical junctures.
Document Your Business’s Biography
The story of your business is an important one that will inform so many aspects of your company going forward. That’s why it’s important to include a profile or biography of your company in the business plan itself. It can then be incorporated into funding applications and presentations, marketing materials, your business’s website and other documents.
In this section, explain why your company is in business. Answer the question, “Why did you start this business?” Typically, entrepreneurs are motivated in part by an abiding interest or passion. The story of your business should reflect that commitment and interest.
The business’s core values and mission statement can also play an important role in your business biography section. Additionally, you should include biographies of all key personnel in this section. Set out their experience and qualifications to lead the company. Also, describe how these people will work together as a team to keep your business running smoothly.
Outline Your Business Model
Your plan document should also include a clear explanation of how your business operates on a day-to-day basis. This section should answer the following questions:
- What are your product or service lines? What do you do, or provide?
- Who will you provide these products or services to? You should include profiles and data about your prospective customers or clients.
- How will you be paid, in reference to price points and payment terms?
Your basic business model should be outlined in four or five paragraphs, with as much supporting documentation as you can provide for any assumptions made in the content. For example, if you have any data regarding your customers from your earlier market research, present that data in a visually attractive format as an appendix to this section.
Create a Basic Marketing Plan
Marketing is a large topic, but it’s essential to include a section in your planning document that outlines how your company will acquire customers or clients.
Advertising is typically the first strategy that comes to mind for many new entrepreneurs. However, these days, paying to advertise may not even be a viable or desirable avenue to pursue in a new business. Other strategies may prove more effective, such as word-of-mouth, referrals, organic social media and direct mail.
Additionally, consider your company’s web presence. Most prospects will expect even a small or solo new business to have a website of some kind. It should include a way to contact you, some information about your services or products and your company’s profile at a minimum.
Prepare Your Business’s Financial Projections
A crucial part of your business plan document is a section outlining your projected revenues and expenses for the first few years of its existence. It’s important to keep these projections realistic. It’s also crucial to ensure all financial projections are based on concrete assumptions that you can support with data of some kind. This is not the place to make wild guesses.
Remember that any future investors will be interested in the numbers you present and your budget projections, but more importantly, they will also want to know how you came up with those numbers.
Make sure your projections are conservative, especially in the first fiscal year. Generally, new businesses discover it takes longer than anticipated to build up momentum in their target markets, and often revenues lag as a result in the early months.
Proof and Edit Your Final Document
If at all possible, hire a professional copy editor to proof, edit and format your final document. Mistakes detract significantly from your company’s professionalism and can negatively impact plans for the future.
Your document should be free of typographical errors, and the language should flow naturally. An elegant, professional-looking design for your document will also help to create a positive first impression for potential investors, lenders and employees.
Annie Sisk is a freelance writer who lives in upstate New York. She holds a B.A. in Speech from Catawba College and a J.D. from USC. She has written extensively for publications and websites in the business, management and legal fields.