A business plan is your north star when you start and grow your own business. It helps you chart your course, focus your efforts, and decide how you’re going to perform. With an effective business plan, you can easily present new opportunities, revenue streams, innovations, and customer ideas.
A formal business plan is also an important document to demonstrate to interested parties — employees, investors, lenders, partners and yourself-that you undertake to develop the business. Creating a business plan prompts you to ask yourself the tough questions, from pricing strategies to assessing the competition, and ultimately allows you to select the strategies that will propel growth and success.
As you sit down to write a business plan, ask yourself these three questions:
1. Is your business idea feasible?
Creating a business plan requires you to analyze:
- The competition
- The viability of the market you are targeting
- The client you are looking for
Considering the above factors, how successful is this opportunity? Can you (and how will you) stand out from the competition? Is there sufficient demand for your products or services?
Creating a business plan involves researching your target market as well as the competitive landscape, and it serves as a feasibility study for your success. Knowing and staying on top of trends, market size, and industry views will help you define your business role.
Whether you provide a product or a service, what is your differentiator? Can you clearly define this on paper? This keeps you focused on innovation and helps you understand your market, the competition, and your customer.
2. How does your business make money?
It sounds simple, but whether you are starting, expanding, or expanding your business, you need to know and understand your numbers and finances perfectly. Forecasting, financial projections and expense management will collectively help address the assumptions associated with the business and your income statement (P&L).
What comes out every month? What are the costs? What are your expenses? Do you have staff? Do you have a physical space? It’s good to generate income, but you also need to manage your expenses and generate profit.
Knowing your finances helps you maximize your operations and assess current opportunities and the challenges ahead. Being financially smart allows you to be agile in adapting and / or pivoting to positive and negative impacts on your business. It also helps pave the way for financial security, whether it’s meeting goals of increasing profits or paying off a lender or investor.
Understanding the numbers shows that you are committed, that you have a solid plan, and that you are the right person to not only run this business, but also be successful.
3. Can you explain both the risk and the reward?
Your ability to answer questions that are critical to yourself and your investors / lenders will help you lower your risk and determine the reward. Proactively analyze potential business scenarios and define how you would respond to them.
To guide you, do a SWOT analysis:
What are the most efficient parts of your business? What makes you unique?
What improvements can you make? Where are you short of resources?
What can you enjoy next? Are there any untapped areas you can grow in?
What type of industry complications should you be aware of? Could your competition become an obstacle?
This analysis allows you to proactively address the impact of your business decisions and operations. Consider doing this exercise every year. You might be surprised how much you find out about your business as you write it down (rather than just guessing in your head). This will help you maximize opportunities and minimize threats as you move forward.
So many business owners think, “I have an amazing idea. I’m just going to do it, ”and it’s amazing. This is the reason why you are a business owner. The key is being prepared, and it starts with a solid business plan. Are you ready?
About the Author
Cate Luzio is CEO and Founder of Luminary, a member-based career and personal growth platform whose mission is to uplift, develop and propel women through all phases of their professional journey.
The above information is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your situation. Unless otherwise specified, references to any third party links, services, or products do not constitute endorsement by Yelp.