The Startups Nightmare: A Business Plan that Works
A business plan is a written summary of your proposed business. It is a thorough definition of:
- Your business
- The business goals
- The road map that gets your business up and running
The key elements of a business plan are much the same, whether for a large business or a small business. This doesn’t mean your business plan must be as thick as that of a Fortune 500 company, but it should include the same elements found in the business plans of business giants such as GM, Apple, and CBS.
You can have a great business idea — but unless you know how to share and communicate it in a professional, convincing way, it is not likely you’ll be able to get it off the ground. The startups or small business nightmare largely edge on not only creating the business plan outline that best fits the business but also on how to effectively and clearly communicate the intricate parts of that business plan to the stakeholders.
In order to win over investors and buyers and start the business or create the product and/or service you’ve always dreamed of, you need to create a professional and working business plan that cannot be rejected by anyone. If that sounds lofty, don’t worry — you don’t need the help of a professional design and branding team, or to break the bank.
Write Your Own Business Plan That Works TODAY Without Breaking the Bank …
All you need is to know:
- The type of business plan that is suitable for your startup and/or small business
- The value and purpose of your business plan, specific to your business idea, the services, and products that meet your customer’s needs
- The key elements that must all be in sync in your business plan
- The steps involved in developing a business plan that works whether at the start-up stage of a small business or a conglomerate that wants to launch a new product or service to their target customers.
This article is not only a step-by-step business builder that helps you reorganize your thoughts to shape a cohesive plan, but it also breaks down major sections of your business plan outline into bite-sized pieces that are more easily understood, and help you do more in less time.
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Best of all, you do not need to break the bank to write your own business plan or to outsource an expensive expert, especially as a startup or small business owner or team member — just follow the simple step by step outline and tweak it until it fits your vision, mission and objectives.
You will be able to capture all your financial analyses in a single financial plan including all your forecasts and financial data. At each stage, you may choose to share your business plan online and collaborate with your investors, other business or stakeholders. Not only will you be able to include each key element in the business plan template that you develop but also build up a comprehensive and all-inclusive business plan that is relevant to your business idea and business projections.
Definition of a Business Plan
A business plan is a written summary of your proposed business. It defines your business, identifies your goals, and describes the road map for getting your business up and running. A business plan is not static. It is a dynamic document that changes over time as you grow the business and learn more about it.
Core Questions to Address in a Business Plan
- What is the purpose of the business?
- What are the business goals and objectives?
- What is the market opportunity?
- What are the core products or services?
- How do the products or services meet the customers’ actual needs?
- How will you promote and sell your products or services?
- What are the key capabilities of the people required to run this business?
- Is the business financially viable?
- What are the critical success factors?
Types of Business Plans
Simplified Business Plan
A streamlined and brief plan that you can use either as-is or as a starting point for a Traditional Business Plan.
Traditional Business Plan
A more structured and formal document that has a vast amount of information.
What is the Purpose of the Business Plan?
The type of Business Plan you should prepare demands largely on its purpose.
- To find out if your idea is any good
- To serve as a blueprint for developing your startup business or branching out to other products as an established small business
- To secure financing
- To serve as the basis for planning and managing your business
Business Plan Framework
The business plan is the framework for your startup or small business, a great benchmark at your disposal to see if your business is meeting its goals. The following framework is a guide through the development of your business plan outline and template, to the completion of a solid and clear business plan that works with all the elements, components, and essential parts defined to detail.
12 Key Elements of a Traditional Business Plan
A tradition business plan comprises of 12 key elements. This include:
- Executive Summary
- Goals and Objectives
- Product and/or Services
- Market Analysis
- Competitive Analysis
- Marketing Strategy
- Management Plan
- Operating Plan
- Financial Plan
- Critical Success Factors
It may seem like an overwhelming task to put together all these complex essential elements of your business plan. Notwithstanding, the business plan is the foundation of your business. Putting it together and writing it is an essential step in the launching of your business or new products and/or services, growing, and thriving. A business that has a business plan in place has a less likelihood of deviating from its road map to running successfully.
Do not be deceived.
There are other factors and strategies that play a major role in the smooth running of your business. These include your team, hiring wisely, training, effective communication, reward and recognition of your team, business and/or organization culture, … and the list goes on and on.
For now, this article will highlight some of these key elements of the business plan for the purposes of equipping you as the startup founder or small business owner or team member on the areas that largely cause stakeholders to reject business plans. The purpose is of this write up is to ensure that this nightmare will no longer be part and parcel of your business plan writing journey ever again.
Many articles and books have been published on business plans, but the goal of what you are reading now is to ensure that the startup or small business has access to FREE information on how to nail their business plan fast, efficiently and at a cost-effective way. More details will be available as a free download (for a limited time only) on Amazon. Sign up to our newsletter with your name and email so as not to miss out on the FREE offer.
The executive summary is a comprehensive documentation of the key elements of the entire business plan. It is usually 2 – 3 pages long and goes at the beginning of a Business Plan, though it is written after all the other components of the plan are complete. It should provide a short, concise and optimistic overview of your business that captures the reader’s attention. The executive summary shows the:
- The Company and Management
- Products and Services
- The Market
- Competitive Advantages
- Financial Projections
- Start-up Financing Requirements
This is a clear and brief description of the purpose of a business. It incorporates socially, meaningful, and measurable criteria, addressing concepts such as:
- Moral and/or ethical position of the business
- Public image and/or reputation
- Description of the target market
- Description of the product and/or services
- Strategic guidance and direction of the organization
- How the organization’s culture is instilled
Let us look at a few mission statements of businesses that we all know.
3 M: “To actively contributing to sustainable development through environmental protection, social responsibility, and economic progress”
Walmart: “To improve the quality of life for everyday people around the world”
Walt Disney: “To make people happy” “To entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company”
Can you now write down your mission statement?
It is a statement about what the business’ future would look like if the mission is achieved. The vision:
- Enumerates the ambitions of what the business aims to achieve
- Generates enthusiasm among key stakeholders, including employees, investors, and customers
- Aligns to values that you want employees to exhibit
- Filters out certain opportunities which do not contribute to your vision
For the above examples, the vision statement is as follows:
3M: “To contribute to society’s move to sustainable development”
Walmart: “Quality goods at low prices, responsible manufacturing, and opportunities for growth. We’re dedicated to excellence in every part of the business”
Disney: “To be one of the world’s leading producers of entertainment and information”
Google: “To provide access to the world’s information in one click”
What is your vision?
Market Analysis can be time-consuming but needs to be done if the Business Plan is going to have validity. Some tips on how to do basic analysis:
- The internet is a great source for information regarding market size, demographics, and trends
- Talk with potential customers, other businesses in your area of operation, but remember to identify your competitive edge
- Check out Social Media
- How will you price, promote, sell your products and/or services?
- Where will your prospects and customers access your products and/or services?
This should describe the business’ leadership team and how the organization will be structured. At the end of the management plan, your stakeholder should be persuaded that have the appropriate structure and team to lead and operate the business.
A way to organize the Management Plan section is to break it into:
- Ownership Structure – Describe the business’ legal structure. Examples:
- Sole Proprietorship – a business owned and operated by one individual (most common)
- Partnership – a business owned and operated by multiple individuals
- Corporation – a distinct legal entity separate from its owners
- Internal Management – Describe the key positions in the organization and identify who is going to have responsibility for each position
- External Resources – Describe the use of outside expertise to augment the internal team. This expertise can be used to provide advice and/or external oversight
- Human Resources – Describe your critical staffing needs in terms of roles, capabilities, and number as well as a plan to hire, train and retain
There is one rule for industrialist and that is: Make the best quality goods possible at the lowest cost possible, paying the highest wages possible.
— HENRY FORD
The Financial Plan
Financial Plan provides a 2 to a 3-year projection of the business’ funding requirements and financial viability. The business plan for new businesses includes financial reports that are projections of the future. They are based on key assumptions (key financial drivers) which should be documented accordingly. The four financial drivers are:
Pro forma Income Statement, also called a Profit and Loss Statement, lists projected revenue and expenses. It shows whether a company will be profitable during a time period.
Cash Flow Statement is a projection of cash receipts and expense payments. It shows how and when cash will flow through the business.
Break-Even Analysis projects the revenue required to cover all fixed and variable expenses. It shows when, under specific conditions, a business can expect to become profitable.
The Balance Sheet describes the business’ cash position including assets and liabilities. It indicates the financial health of a business.
Business Plans for start-ups at times do not have a balance sheet on some conditions.
Let us dissect these four financial drivers that may break or make the financial plan segment of your business plan.
A Pro Forma Income Statement
As stated earlier, a pro forma income statement is also called a Profit and Loss Statement. It is the report that lists all the revenue and expenses of the business. It is the proof of whether the business will be profitable during a time trading period.
Financial performance is assessed by giving a summary of how a business insures its revenue and expenses through both operating and non-operating activities.
Revenue is sales during a period from delivering products, rendering services, or other activities that constitute the business’ ongoing operations.
Expenses are costs incurred during a period from delivering products, rendering services, or other activities that constitute the business’ ongoing operations. Expenses are categorized as follows:
- Cost of Sales consisting of direct costs attributed to products produced, services rendered and sold by the business
- Selling, General and Administration (SG&A):
- Selling, in this case, represents costs needed to sell, promote, and distribute products or service
- General and Administrative (G&A) represent expenses to manage the business
- Depreciation is the charge with respect to fixed assets. It is a systematic allocation of costs
The following is a sample of a Proforma Income Statement for Business XYZ. Tweak yours to give a true reflection of your startup or small business.
The Cash Flow Statement
A cash flow statement is the projection of cash receipts and expense payments. It shows:
- How and when cash will flow through the business
- The movement of cash into and out of the organization with the purpose of maintaining sufficient cash balances to operate the business
At the start-up phase of a business, this projection aids you in determining what money you would need to raise through investment or loans.
Poor management of cash is the largest cause of business failure.
The three parts to Cash Flow Projections are:
- Cash Receipts: Estimated cash received in a month from sales and other sources.
- Cash Disbursements: Estimated cash to be paid out in a month.
- Reconciliation to Cash Receipts to Cash Disbursements: The end of month net cash position, calculated as:
Note that the Cash Balance at the end of the month is calculated as the Cash Balance at the start of the month + (add) Cash Receipts in the month – (less) Cash Disbursements in the month.
Be cautious about not being overly optimistic with cash receipts for projected sales. Be disciplined in maintaining cash balances for unexpected events.
A Break-Even Analysis
This is the projection of the revenue required to cover all fixed and variable costs. Break-even analysis predicts when, under specific conditions, a business can expect to become profitable. In a break-even analysis curve, the variable costs, fixed costs, and profit margin must balance out with the revenue.
Variable Costs are costs that fluctuate along with the volume of quantity sold. Examples: materials, direct labor, Tax
Fixed Costs: Are costs that don’t depend on volume of quantity sold. Examples: Rent, base utilities base labor, interest payment
Revenue: Is the number of Units * Unit Selling Price. Setting the right Unit Selling Price is critical; it needs to be set at a price that the customer is willing to pay AND will cover the variable cost per unit plus a reasonable profit margin.
The Break-Even Point is reached when the business is neither realizing a loss or a profit. It’s important to understand what the analysis is telling you. Ask yourself, ‘is selling that number of units feasible?’
The Balance Sheet
This describes the business’ cash position including assets and liabilities. It indicates the financial health of a business.
Assets: Are items owned by the business, typically organized into liquid assets; those that are cash or can be easily converted into cash. And, non-liquid assets that cannot quickly be converted to cash, such as land, building, and equipment
Liabilities: Also known as Debt, are funds owed by the business and broken down into current and long-term categories
Net Value of the Business: Is the difference between Assets and Debt
If a business were to close, then its debts would be paid and any remainder would be given to the business owner(s).
10 Critical Success Factors
Critical Success Factors are conditions or variables that have a significant impact on the ability of the business to achieve mission and goals. They are influenced by the industry and geography your business operates in. For the purposes of this article, only 10 critical success factors are highlighted. If your business is affected by other variables that are not in this list, note them in your business plan with the extent to which they are affecting your startup or small business or conglomerate.
External Factors are beyond the organization’s control. Such as:
- Competitive Threats
- Government Regulations / Stability
- Economic Conditions
Internal Factors are largely within the organization’s control. Such as:
- Attracting and Retaining Key Personnel
- Cost Containment
- Customer Service
- Product Development
- Quality Control
Finish each day and be done with it. You have done what you could. Some blunders and absurdities no doubt crept in; forget them as soon as you can. Tomorrow is a new day; begin it well and serenely and with too high a spirit to be cumbered with your old nonsense.
—Ralph Waldo Emerson
10 Helpful Hints When Writing a Business Plan
The measure of a Good Business Plan is the level and quality of thought that went into preparing a plan – it’s not based on the number of pages!
- Create a vision that evokes excitement
- Focus on the market opportunity
- Focus on who the customers are and what they want
- Respect but don’t fear your competitors
- Identify and be responsive to risks
- Get a second, third, fourth opinion
- Expect the unexpected
- Be differentiated
- Be clear about the rewards
- Don’t skip developing a Business Plan!
You are now armed with information before you decide to hire anyone to write a business plan for your hustle, and business.
Who will you blame if your business pitch is rejected again?
Are you able to develop and write a business plan for your startup or small business?
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