Creating a business plan makes a smart move when starting a business. Although some entrepreneurs may think launching a business without a business plan is an act of bravery, going forward without a plan may leave you with much more to be afraid of in the future. But business plans are not just for startups. Growing businesses need plans too. This is also true if your business needs to transition, such as pivoting during the COVID economy or for digital transformation.
Many companies only think about developing a business plan—but never create one because it seems overwhelming. This article breaks down the process into some steps and guidelines that can make business planning easier and more effective.
Step 1: develop an outline
Before you develop your full business plan, first create a business plan outline listing all the components you’ll need. A business plan outline makes a great way to start because it simplifies the process, and even if your entire plan never gets fleshed out, you will at least have an outline of touchstones that can help focus your goals and future decisions.
There are plenty of sample business plans and templates for you to look at for inspiration. Even just noting the headings of these samples can help you structure your outline with items to consider. For example, here are some key things to include:
- A mission statement
- Your products and services
- Your USP
- Your marketing plan
- Your operational plan
- Your financial plan
Not all these components will go into your formal business plan, but after the year we saw in 2020, carefully considering these elements can go a long way in aiding your progress.
Step 2: write a mission statement
Creating a mission statement helps you clarify why you’re in business. It should encapsulate your goals, philosophies, objectives, and more. To develop your mission statement, ask yourself these questions:
- Why did you start/buy this business?
- Who are your customers?
- What values do you stand for?
- What perception do you want others to have of your company?
- What are you selling?
- What kind of work environment have you created?
- What sets you apart from your competition?
Your mission statement should be short, about three or so paragraphs, but you can use the information when you create your business plan. Like business plans, your mission statement is dynamic—don’t write it and forget it. Review it periodically to make sure it still reflects your operating philosophy—and your actions.
Also, don’t confuse your mission statement with your vision statement—which is a future forecast. According to Tim Berry, founder of Palo Alto Software, a vision statement is what you expect your company to look like in three years. As your small business grows, your vision should evolve—as your experience naturally improves your ability to predict the nature and health of your company and marketplace.
Step 3: define your USP
A USP (unique selling proposition) is what makes your business different and stand out from the crowd. Here’s how to determine your USP:
- USPs are about benefits, not features. How does your business help your customers? How do they benefit from doing business with you?
- Do you know why your customers do business with you? Understanding this will help you craft a compelling USP.
- What are your competitors’ USPs? If you’re trying to stand out from the pack, you need to know how your competitors define themselves.
It’s important to live up to your USP. Think of it as a promise you make to your customers—and nothing drives customers away faster than broken promises.
Your USP should be a major driver of your marketing plan (itself another key element of your business plan). Knowing what makes you different, consider marketing strategies and tactics that can best portray what makes you unique to your prospective customers.
Step 4: consider how you’ll operate
An operational plan is another important subsection of your business plan. This is where you outline the tasks your employees will need to do to accomplish your company goals. An effective operational plan can include these elements—all of which should be measurable, specific, and realistic:
Step 5: determine how you will make money
Finally, your business plan should address how you expect to monetize your business. At the very least, outline the financial aspects of your business. These can include:
- Available starting/operating capital
- Assets and equity
- Income streams
- Sales projections
- Expected costs (one-time, fixed, and variable)
- Debts and liabilities
A simple balance sheet makes a good starting point for establishing and periodically assessing your financial plan.
For simple planning, go lean
Do you need to develop a formal business plan? Maybe. If you want to raise money and attract investors, yes, you do. If you just want to figure out how to plan for 2021, try creating a lean business plan.
What’s a lean business plan? Lean planning is a way of managing your business by understanding the minimum viable planning you must engage in to grow your business strategically. Although minimal, it can help you make decisions about what opportunities to take and which ones to ignore. At its bare bones, a lean plan may include:
- An executive summary or pitch
- A financial plan with a projected sales forecast, profit & loss, cash flow forecast, and balance sheet
- An action plan with scheduled milestones and accountability
- Performance tracking to compare actual financial results with your planned financials and other key metrics
After you create a lean plan, it may be helpful to review your plan monthly, comparing your planned numbers against your actual results—and make adjustments accordingly.
Money and tax planning
One of the elements you’re looking for when you review your business plan is cash flow. Are you earning what you projected? This year, it’s likely you are not. Don’t panic. This year, circumstances were definitely beyond your control.
If you’re facing cash shortages, this is a good time to cut expenses. Are you paying for software services that overlap? Do you pay for memberships in organizations you don’t participate in or for magazines/newsletters you never read? Are you still paying rent and overhead costs when your team is working at home?
If cutting expenses isn’t enough, there are resources you can turn to. Fundbox offers lines of credit and other financing options to help. The Small Business Administration is offering several types of loans you can look into. As of December 27, 2020, Congress has approved additional funds for the PPP. Now Fundbox can help connect you with a PPP lender.
Another area to examine is your tax planning. Are you going to end up owing more or paying less than you thought before the coronavirus pandemic hit? It’s so easy to inadvertently make mistakes when it comes to paying taxes. Talk to your accountant to make sure you haven’t done anything wrong.
Developing a strategic plan
You may think that’s all you need—especially if you’re already in business. Hold on! You also need to create a strategic plan. Why is strategic planning important to a small company? Because no matter how successful your business is now, a strategic plan will help you scale even faster. And after 2020, so many aspects of your company may have changed, developing a strategic plan can help you get back on track.
Here’s how you can create a strategic plan that covers anywhere from five to 20 years:
Step 1. How is your business doing now? Examine your mission and vision statements, business plan, sales reports, and financial records. Identify your business’s strengths and weaknesses and the opportunities in the market by doing a SWOT analysis.
Step 2. Where do you envision your business being in five or 10 years? How big do you want to grow? What are your expansion plans? Do you want to add a product line, new services, new locations, or go global?
Step 3. Envision your future. Think about your personal goals. Do you want to work less? Do you want to be a hands-on manager? Are you a serial entrepreneur—do you want to start more businesses? Codifying these goals in writing helps you determine what you need to do to achieve them.
Step 4. Create a plan laying out the steps you need to take to achieve your goals. Start with the goal. What do you need to do to reach it, and how long will it take? Here’s where the short-term planning comes in. Working backward from your desired outcome, identify what you need to do to achieve it and when. For example, if you want to hit $XX million in sales in five years, what do you need to do to reach that number Each goal should be addressed separately.
Step 5. Measure your success. Your goals should be measurable. Determine your key performance indicators (KPIs). Sales? Number of locations?
Step 6. Review your plan every four to six months. Are you on track? If not, pivot and adjust.
How do you plan for an uncertain future?
You get started now. If 2020 has taught us anything, it’s that John Lennon was right when he said, “Life is what happens to you while you’re busy making other plans.” But don’t let that discourage you. Starting with a business plan outline makes it’s easier to create a business and strategic plan.
Once you complete your plans, don’t just put them back in the drawer or leave them buried deep in the bowels of your computer. One trait all the plans we discussed share is most need to be reviewed quarterly to ensure you’re on track or learn why you’re not.
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