A business plan is a roadmap for organizing, managing and growing your business. A written business plan is commonly required when an entrepreneur is applying for a commercial loan or seeking an equity investment in their new venture. Regardless of capital funding needs, creating a business plan is an often underestimated step on the entrepreneurial journey—and it can be accomplished prior to committing valuable time, effort and money.
Customers and Competition
There are many benefits to completing the exercise of drafting a written business plan. The greatest of these is freeing your mind to focus on execution. You may have heard that ideas are a dime a dozen, but what makes an idea truly valuable (worth millions) is taking action (or execution).
We find the inability to take action or make progress often indicates there is a decision or decisions that have yet to be made. A written plan is effectively a list of decisions that you, the business owner, have already made. Think of creating your business as a two-step process. First, transfer the ideas from your mind and onto the page. Second, take the plan from the page and put it into action.
Two crucial elements of any business plan are your understanding of your customers and of your competition. People often reach out to our office with the following assumptions:
- My product or service is so universal that EVERYONE is a potential CUSTOMER; and
- My product or service is so unique that NOBODY is a potential COMPETITOR.
Common sense tells us that both of these assumptions cannot be true, right? There is more research to be done! The clearer your understanding of who will purchase, why they will purchase, and where they will encounter your product, the more likely you are to connect with them—and the less likely you are to waste scarce resources trying to reach people or businesses who are unlikely to buy.
The acknowledgement that competition exists in the marketplace is reasonable, and it can be good for two reasons: 1) If there are profitable competitors, somebody is spending money in that market; and 2) Understanding the strengths and weaknesses of your competitors allows you to determine your points of differentiation and tailor the message you use to reach your customers.
Crafting Your Plan
There are a number of different ways to format your business plan. Not every business concept fits into a rigid template, but some common questions should be addressed. Here is some additional information to provide in the narrative of your business plan:
- Explain how your firm will be structured and run. Do you intend to operate as a sole proprietorship or partnership? Or will you form a limited liability company (LLC) or S or C corporation? Who will be involved in the management? What skills and experience will they contribute to the firm’s success?
- Define the products or services you intend to provide. What problem does your offering solve?
- Describe the location of your business. What facilities and land improvements will you need?
- Include a marketing plan describing how you will find, acquire and retain customers. What forms of advertising and promotion will be used?
- Provide an analysis of your competition. What do they do well? What do they lack? How does your product or service perform faster, better, cheaper, or with higher quality or customization?
- Create preliminary operating procedures. Identify equipment, materials and inventory requirements. Outline plant hours for production or store hours for sales.
- Outline the personnel needed. Identify any skills, training or expertise outside the management team that needs to be hired or outsourced.
- Document any actual financial results to date and prepare financial projections for the next three to five years. A simplified way to approach the financial projections for your plan is to answer the following questions:
- What product or service is being offered?
- How much of it or how frequently is it being sold?
- Is there any money left after it is produced and sold?
This article is meant to be a brief overview of the process, not a comprehensive course in business plan writing. Our office can provide you with a business plan template that includes additional prompts and details to consider. We also have tools to help you visually represent your business model and identify key components necessary for your company to succeed.
Building your customer knowledge and understanding the value proposition of your product or service in the marketplace may require additional guidance. Crafting a plan to create a positive customer experience and implement a profitable revenue model takes time and effort. We are here to assist you in defining your business concept, developing client relationships, building your organization, and creating a productive and profitable operation. PM
Eric Sampson is director of the Illinois Small Business Development Center at Bradley University. To register for the “Starting Your Business in Illinois” virtual workshop, email [email protected] or visit bradley.edu/academic/colleges/fcba/centers/turner.