Coming up with the million-dollar idea was the fun part. But turning that idea into a successful company requires a business plan. Here’s why: A great business plan helps you plot your course and focus your efforts, which is what it takes to meet short- and long-term goals. It also demonstrates to interested parties—employees, investors, lenders, partners, yourself—that you’re committed to building the company and that you’ve got what it takes.
A considered business plan also shows how you’ll generate revenue and handle expense management, gets honest about how long it will take to turn a profit, maps out how you’ll attract and retain customers, and lays out hiring and operating practices. It can be intimidating to get started, but here are a few key things to know that will make the process much easier.
Get honest about potential problems.
To make sure your business plan is thorough, perform a SWOT analysis. That stands for: strengths, weaknesses, opportunities, and threats. This exercise brings hidden assumptions or missed challenges to the forefront. Pro tip: Go through the weaknesses and threats first. It won’t be easy to stare down all of the potential pitfalls, but it’s important to get comfortable being uncomfortable about your business. And ultimately, being prepared will make you feel more empowered and in control.
Your list should be comprehensive and include weaknesses such as:
Possible cash flow blocks
Lack of experience or assets
Gaps in your capabilities
A small network
As for threats, you’ll need to look at the macro environment, including:
Now that you’ve faced the headwinds, turn to the positives that will push your business forward:
Why are you building the business?
What are the strengths and experiences that you and/or your product will bring to the market?
What are your differentiators?
Focus on what you bring to the table as the founder, your experience and background, any financial reserves you might have or are able to access, your network, and overall value proposition. Outline the opportunities your business has in the market, such as new innovations and collaborations, leveraging market conditions or industry changes.
With the good stuff laid out on paper, look at the weaknesses and threats again and see how you can mitigate them with your strengths and capitalize on new opportunities. This will ensure a business plan that shows you’re aware and prepared for what’s (potentially) to come.
Include your research.
A good business plan shows you’re ready. That means clearly explaining who and what your company does and why you’re leading it. You’ll also need to include competitive analysis—industry trends, market sizing, and what role your business will play—and who your target customer is. An understanding of the industry serves as a feasibility study for your success.
Be clear on how you’ll operate.
The bottom line is important. This means you’ll need to show what resources it will require to build, run, and grow your company. To do that, make sure your business plan includes an operating plan, as well as a thorough breakdown of your financials—start-up capital, ongoing expenses, and other key costs.
Having a handle on your numbers, current and forecasted, is critical for success. It will also enable you to answer important questions that will come up from potential lenders or investors. Tell a great story, but have the facts to back it up.