I’ve got some news for you: you need to write a business plan.
I know you don’t want to. I didn’t want to either. Really, no one does. But the fact is, whether we want to or not, all entrepreneurs and small business owners need to create a business plan. The only way to get one is to sit down, crunch the numbers, analyze the data, review the competition, map out your strategy, do the work, and pound it out.
Your business plan is your roadmap to success. It tells you, and others, how you plan to get from Point A to Point Z. Ask yourself this question: Would you ever get in your car before a long road trip and put a bag over your head before heading out? Of course not. With a bag over your head, you would never know if you were headed in the right direction, if you had enough gas, if a red warning light comes on, nothing.
Writing a business plan allows you to take the bag off of your head and see clearly where you are headed and how you plan on getting there. It is your blueprint for how you will get to where you want to go. It will allow you to really think through your enterprise, set goals, create benchmarks, and figure out what resources you will need to get those things accomplished. For that reason alone, a business plan is a valuable tool for anyone in business – whether they are just starting out or are a seasoned pro.
But even beyond that, a business plan is a necessary and valuable tool if you ever want to get outside funding for your enterprise. A banker will definitely want to see your business plan, as would any sort of angel investor.
So, how do you actually write a business plan? There are all sorts of ways to get one done. You can Google it, of course, and find many samples, but better than that, I suggest to use some business planning software that will walk you, step-by-step, thought the process. I am partial to the products put out by Palo Alto Software, especially their online site and tools, Bplans. I think they make it as easy and painless as possible.
What will be in your plan? Essentially, it should cover the following areas (note: while your actual business plan will probably be around 30 pages, we have added in some excerpts below so you can get an idea of what each section might look like):
Executive summary: This is the “greatest hits” of your business. What is your secret sauce, why is your business special, why should someone be interested in what you are doing, how will you make a profit? Put your best foot forward here.
As a specialty coffee retailer that will be providing hot and cold beverages at drive-through locations throughout the metro area, The Daily Perc (TDP) will tap into the growing trend for specialty coffee. Using only the best beans and ingredients, as well as daily specials, TDP will drive sales by targeting both daily commuters as well as the casual coffee drinker.
Business and industry overview: Tell us about your business in more detail, and how it fits into the marketplace and competitive landscape. Is this a thriving industry? What are you bringing to the party?
The coffee industry has grown by tremendous amounts in the U.S. over the past decade. Starbucks, the national leader, had net reveue sales in excess of $14 billion last year, and even across-the-board coffee sales generally have increased.
Competition and competitive advantage: Explain here who your competition is and who you think it will be in the future, and how you expect to deal with them and gain market share.
There are four major competitors in TDP’s drive-through market. They are the national chains of Starbucks and Panera, as well as two local businesses. The advantage that TDP will offer is that we will have Starbucks’ quality at grocery store prices.
Customer acquisition and marketing: In this section of your business plan, you will think through whom your customers will likely be, how you will market to them, and your strategy for capturing their attention, and dollar.
Additionally, because digital is so important now, you will also outline your Web strategy here, any social media marketing plans, and so on.
The Daily Perc will penetrate the commuter and casual coffee market by deploying a two-fold strategy. First, our locations will only be found in highly trafficked locations, and our distinctive blue and gold motif will draw attention to the stores. Second, we will be hiring a local digital marketing company to spearhead a robust social media marketing campaign
Financials: For most entrepreneurs, this is the tough stuff. In this section you will need to outline your startup costs, operating budget, cash flow, break-even analysis, income and expenses, profit and loss statements, and so on.
How do you know this information if you are a new startup? The answer is the same as with the rest of your business plan – research. No, you don’t know exactly how much you will make in Year 1 (let alone Year 5), so all you can do is estimate to the best of your ability. (A word of caution – do not exaggerate. Experienced business people can see through puffed-up numbers in a flash.)
The Daily Perc’s financial picture is quite promising. Initial cost outlays will be reduced given that the two planned locations have already been secured and were previously remolded as drive through locations.
[Add financials here.]
Benchmarks: Throughout the plan, you will list what you will want to accomplish, and by when. Benchmarks might be income, profit, Web traffic . . . it all depends.
By the end of Year 1, the two locations will have generated 288,000 tickets, resulting in $588,000 in revenue. Sales are expected to grow by nearly 400% in the second year due to the addition of two more locations. On the marketing front, our social media campaign should result in 50,000 Facebook Likes by Year Two, and Website traffic of 10,000 pageviews a month.
As you can see, a business plan is a valuable tool for all sorts of reasons, but the main one is this: It reduces the risk of your enterprise. By thoroughly thinking through your venture, you lower the odds of making a big mistake; by taking the bag off of your head, you will see things more clearly.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.