Why you need a business plan

|by Shaun Ralph|Business Advisory

You may be wondering why you need a plan in the first place. After all, you have a clear idea in your mind about what you want to achieve.

Some good reasons to have a business plan are:

To clarify your ideas

Writing something down gives it structure and substance. Your ideas will be clearer on paper than in your head.

To discover and solve problems

The business idea you have in mind may have some holes – you might not have covered everything. This will become much more apparent when your words are on the page.

To get feedback from others

A properly written business plan can be shared with trusted people to get their advice.

As a formal document

Banks, investors, accountants and lawyers will want proof that you’re serious about your business. A written plan will provide that proof.

To guide you as your business grows

A good business plan will keep you on track and focused, even as day-to-day work becomes a distraction.

To create a business plan, ask yourself these 10 questions:

  1. The executive summary

This is where you describe your company and the product or service that it will sell. This must be brief, to catch and hold people’s attention.

Try to describe the goal and mission of your business in just a couple of sentences. Work hard at this and try to make it memorable.

Treat this section as an ‘elevator pitch’ document – it should be succinct and easy to remember.

  1. Who are your customers?

Do you have a clear idea of the type of people (or businesses) who will buy your product or service? If not, think carefully until you do.

  1. Evaluate the target audience

There’s no room for guessing here. You need to identify the people who will buy from you.

  1. What are your opportunities?

Successful businesses think big. You might be starting small, but you don’t have to stay that way. So write down the possible opportunities for your business as it grows.

  1. Understand the competition

Every business has competition. If you don’t mention yours, investors will think you’re unprofessional – or just plain naive. Be thorough, and list all your existing and potential competitors:

  1. Build a simple financial plan

All business plans should contain some financial information. This should include the overall costs of setting up your business. For example:

  1. Include an outline marketing plan

For this section of your business plan, you need to think about the five ‘Ps’:

Pricing – how will you price the end product?

Positioning – how does your product or service fit into the market?

Promotion – what channels will you use to attract and communicate with customers?

Profit – how much do you expect to make per item sold?

Place – what are your sales outlets?

  1. Plan your operations

Put your vision to one side for a moment. What are the daily tasks that need to be done when running the business? Include all business processes such as manufacture and packaging. Try to cover all departments too, including sales and customer service.

  1. Get the right people

This is one of the most important factors. Think about who you want to hire. How will you find people whose skills complement yours? And how will you convince them to work for you? And think about how you will retain them.

  1. Simplicity is the key

Keep it simple. Complex and long documents won’t be read – either by you or by potential investors. A business plan should be brief, relevant and focused.

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