Basic Elements of a Business Plan
Basic Elements of a Business Plan
Business plans are essential to small businesses. They provide you with direction, help you stay focused on key activities and are required when seeking investment or finance.
At their core, business plans have 5 basic pieces of information. They include a description of your business, an analysis of your competitive environment, a marketing plan, a section on HR (people requirements) and key financial information.
The following is an explanation of the 5 key elements to a business plan.
1. Your business description
Your business description should give a brief, simple explanation of your business. Don’t go into too much information, as those reading it will either be short on time or have little understanding of your specific business.
The goal with your business plan is to be pragmatic, so include what the business is, the products or service you are (or will) provide and who your target audience is.
2. Your competition
Are your competitors someone in the same shopping strip or centre, or someone else local? Is your competition not defined by geographic location? Is the focus more on industry segment, or product/service? Is your business online, competing with others in this space?
The goal of defining your competition is as much for you as anyone reading your business plan. Do your ‘due diligence’ and thoroughly research your market. Try to determine who are the most successful players in your space and identify what makes them a success (e.g. product offering, best pricing, superior service). Once you have this information you then need to assess how you can beat them, however, it’s important to be realistic.
If they are a success because they have 20,000 products, don’t say you can beat them by having 21,000 products. The same with price. If you’re only focused on being the cheapest, then the person who’s willing to drop their price further will win. This ends up a race to the bottom and is an unsustainable business strategy.
Additionally, make sure you have ‘best case’ and ‘worse case’ scenarios of your modeling. Most small businesses overestimate their impact and projections in the short term, which is why they don’t survive long term.
3. Your marketing
Unless you have experience with marketing, this one may be a little bit hard. The first thing you need to do with your marketing is develop a ‘positioning statement’. A Positioning Statement is an organisational statement that defines the benefit of your product/service to your target customer and states how you’re different from your competitors. Once you have this statement, you can then start working on your marketing strategy.
Your marketing strategy should focus on the channels that are right for you. Most will include a website. If you’re in the consumer space, you may also focus on social media channels such as Facebook, Instagram, Twitter and Google+. If you’re in the B2B space, you may focus your social media activity around LinkedIn. You may also want to consider PPC (Pay Per Click) advertising, which is available on most online and digital channels.
The most important considerations with a marketing plan are knowing where your market is, knowing how to access them, and knowing what will create a ‘call to action.’
4. Your people
Does your business have face-to-face engagement with customers, or are your relationships digital? Do you currently have a team of people in place? If so, who are they, and what skills and experience do they bring to the table. If not, what people and skills do you need and for what roles. Most businesses still ultimately rely on people to be successful. Make sure you have the right people in the right roles.
With the ‘people’ section of your business plan, it’s helpful to create an organisational chart that includes roles and responsibilities. This organisational chart should also identify the people gaps that you may need to fill.
From an investor’s perspective, they want to see that you have your team in place and that they have the relevant experience to make your business a success.
5. Your Financial Data
This is where it’s important to have some basic bookkeeping and accounting skills. If you don’t have them, talk to Bizally for assistance.
Your business plans need to include a balance sheet (this outlines your current financial position in a universally accepted format), and your current profit and loss statement (also in a universally accepted format. Again, Bizally can help). Your financials should also include your income sources and costs (such as wages, rent, and other costs).
If you’re a start-up, your business plan should include start-up costs (such as plant, business registration, fit out ETC), at least the first year’s financial statements and a cash flow budget. The purpose of these figures is to demonstrate that you know where you’re going and how you’re going to get there. Depending on your sector and offer, try to create realistic cash flow projections over at least a 3 to 5 year period. This helps both investors and those providing finance that you have a strategy going forward.
‘I’m not confident in creating a business plan without help.’
If you’re starting a new business or even if you have been in business for some time, some of these items may be a little outside of your skill set and knowledge. That is where the help of an organisation such as Bizally can be invaluable. Bizally can demystify the whole process and help you with specific areas, such as projections and cash flow modeling, as well as profit and loss and balance sheets. Simply contact Bizally today and arrange a discussion.