There’s an attitude in the business world that good ideas are worthless. This isn’t to say they don’t have value. Instead, it means that unless you have a solid plan in place to take your idea and turn it into something viable and profitable, you still don’t really have much.
This is where the business plan steps in. It’s your chance to put on paper how you are going to take your amazing idea and turn it into a functional business.
Having a solid business plan is important for any venture, but it is particularly relevant for small businesses. This is because your business plan is what you will be giving to investors, and it is what you will be using to sell them on your idea so that they give you money to get off the ground.
This is its ultimate goal, but it is also an enriching experience for you as a small business owner. There is probably a lot you still have to think through, and by designing and writing a business plan, you will be forced to find solutions to some of the problems preventing your business from getting started.
There’s a lot that goes into your business plan, and there are tons of resources out there, such as this one from Entrepreneur, that will tell you everything you need to know about writing the plan. But let’s go over the points that you as a small business owner need to give particular attention.
Know Your Audience
When you hear the word audience, you are probably thinking about your future customers. This is good; you should always have them in mind. But in this case, we’re talking about a different audience: investors.
Your business plan is for you to map out how you’re going to get your business off the ground, but it is really a sales pitch to the people with the money.
This matters in so many ways. First, keep it short. Of course, you’ll need to include all the information, but no one wants to sit and read a 50-page business plan, unless you’ve convinced them they’ll be missing out if they don’t.
Here’s where the executive summary is so important. You need to convey right off the bat the following things:
- What is the problem? A business succeeds when it identifies a gap in the market and exploits it.
- What’s your solution? You need to identify what your business does to solve this problem you’ve just mentioned.
- Who’s the target market? Tell who will benefit from your solution.
- Who’s helping you? Investors want to see you have a professional, well-run operation that is up to the task.
- How much do you need? Investors want to know how much you’re asking for.
- How much will you make? And they want to know what kind of return you can expect.
Often times it is a good idea to write this part of the plan last, after you’ve had the chance to sort out all the details.
Remember to write to your audience. Don’t say things like “Our product makes it easier for people to get food delivered to their home.” Be more specific, with statements like: “Our product helps reduce food delivery times by 80 percent for no additional cost than current delivery options.”
This is obviously a made-up example, but you get the idea. Get to the point, and get there fast. Many investors will only ask to see the executive summary and then if they are convinced, they’ll ask for the whole plan. Don’t take this part lightly. As a small business, you need to make an impression as fast as possible.
Let’s go into a bit more detail about how you’ll come up with certain components of the summary and plan.
Identify Your Target Market
This is obviously critical. You won’t be writing a plan unless you have this part figured out. But the point to remember here is to be specific.
When describing target audiences, we have a tendency to paint in broad strokes. “Our target market is men aged 18-34 who live by themselves.”
That’s a start, but it doesn’t represent a deep enough thought process about who your target market is. A better exercise is to envision your ideal customer.
One helpful thing to do is to give this ideal customer a name and to describe his/her life. For example, “Our ideal customer is Dan. He’s 26. He lives by himself in the city and works as a software developer at a small tech company. He rides his bike to work, drinks craft beer on the weekends and likes to buy things from socially-conscious companies. He buys less than your average consumer, but when he does buy something, he’s willing to spend extra for higher quality.”
Now when you actually write the plan or the summary, you don’t need to include Dan’s name. But do you see how this exercise has helped narrow the focus? This is very different than our broad definition, and is far more effective in helping you figure out what to put down on paper.
Who’s On Your Team
Investors want to see that you are serious about your venture. They don’t want a bunch of college buddies hanging out in someone’s garage pitching a business idea. This might be you, and that is fine. But each person must bring some specific value to your company and must be a contributor in some way.
When reviewing your plan, investors will want to see how you plan to carry out core business activities. If you have someone in place, discuss why they are the best for that position. If you don’t have someone, explain what you will be looking for.
If you’re not going to hire someone to come in and join the team, explain how you will perform these activities. For example, consider using accounting software such as Kashoo instead of bringing on a whole accounting team. It is easy to use and accurate. Investors will appreciate this attempt to keep costs down.
Outline a Marketing Strategy
This is, in many ways, the meat and potatoes of your business plan. While you may have an amazing idea, and you may have convinced your investors that it is a good idea, you don’t have anything unless you have a plan to get your idea into the hands of people from your target market.
Do your research. How does your target market find out about new products and buy them? Social media and mobile commerce are all the rage today, are they relevant for you?
Also, what attempts will you make at creating a brand? With such a competitive marketplace, having strong brand recognition will be critical for recruiting new sales leads and bringing customers back. Plus, companies with strong branding end up being more valuable and can fetch a higher price later on if you decide to sell your business. You may not be thinking about this now, but you can bet potential investors are. Remember, know the plan’s audience!
When people talk about a business plan, they often focus in on this aspect. How much money are we talking about? It’s easy to think investors will only be interested in this. Let’s set something straight: it’s important, but it’s not the most important thing.
Obviously, you want to be able to demonstrate to investors that your venture is going to be profitable. But if you have sufficiently addressed the points above, this truth will become self-evident.
It’s much better to have nailed the nitty-gritty of the plan. There’s nothing worse than telling investors they’re going to make a whole bunch of money and then having them ask “how?” They should get to the numbers part already expecting the plan to make money. This is just your chance to show them how much.
Writing a business plan is essential for your small business. It is not only required for acquiring funds to get started, but it is also a tremendous exercise for you to think through how your great idea is going to become a real-life, functional business. Do your research, take your time and go get it!
About the Author
Jock is the founder of the online brokerage service. He specializes in the buying/selling and appraisal of business both on and offline. His career began in a marketing startup however most of his work nowadays is focused on helping others find entrepreneurial success.