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The data is very clear. According to a study reported by Small Business Trends, entrepreneurs who have business plans are twice as likely to obtain capital and more likely to grow than entrepreneurs who do not.
But the biggest benefit of a business plan is the thinking you’re forced to do while creating it. You will get new ideas that will make your business even better. You will figure out ways to overcome potential obstacles along the road to startup. You will identify alternate routes you can take if things don’t work out quite as you expected.
This is the fourth in a series of columns that provide several helpful business topics for the new small business. It is based on one of SCORE’s recent projects developed with the help of and in partnership with FedEx. This project is called “Startup Roadmap” and outlines every step in starting a business. A SCORE mentor may use this program to help you reach your goal smoothly.
Fortunately, writing a business plan no longer involves spending months crafting a 60-page document. There are easier, faster and more visual approaches you can use to help you make decisions, calculate numbers and get your ideas down on paper if you don’t want to use a traditional business plan. My first suggestion is to be aware of the two main approaches and choose between these options for doing a plan.
When starting out on a trip, some people prefer to pack light, with just a carry-on and a basic itinerary. Others like to bring guidebooks and pack several suitcases to prepare for every eventuality. This analogy applies to business planning. Whichever camp you fall into, there’s a business planning method for you.
Let’s take a closer look at the traditional business plan and the Business Model Canvas so you can select the right planning method for you.
Traditional business plan
This plan is a thoroughly detailed, written document that can span dozens of pages. It typically includes the following sections:
- Executive summary: A one-page overview summing up your business, product/service, marketing plan, management team, operations, and financial projections.
- Company description: A description of your business, its products/services, your goals, and your market
- Products and services: A more in-depth description of your products/services, what problem they solve for customers, and what makes them unique.
- Marketing plan: A detailed description of your industry and competitors, your unique value proposition, your target customers and how you will reach them, your distribution channels.
- Operational plan: Explains the daily operations of your business, including location, equipment, employees, and processes.
- Management & organization: Description of your management team and/or key employees and their expertise.
- Startup expenses & capitalization: Explains how much it will cost to open your business and how much capital you will need.
- Financial plan: Detailed projections of your financial goals using financial statements to show how you will use capital and when your business will break even.
- Appendices: Backup information or documentation to support the other sections of your plan.
Business model canvas
Sometimes called the lean canvas for startups, the canvas also emphasizes that a key to starting and building a successful business is planning. Sometimes a business plan is required, but it’s not always the answer to creating a successful business. Sometimes, you need to think lean.
Some sources suggest that a one-page approach is all you need, but most important is to:
- Determine the key categories of starting, testing and growing your business.
- Identify your target customers and what you need to do to get them to buy from you.
- Recognize your customers’ problems and how your product or service will solve them.
- Communicate your value propositions that set you apart from your competition.
- Test your solutions and get valuable feedback.
- Determine your cost structure and revenue streams.
Just like a roadmap, a business plan helps ensure you get to your intended destination. After this planning, you should know how much it will cost to get your business off the ground, and whether you have enough savings to fund it on your own, or whether you’ll need some type of additional financing to get started. (Additional financing doesn’t necessarily mean bank financing; it could include borrowing against your personal assets, using credit cards or borrowing from friends and family.) My next column will focus on the topic of finding funding.
Dean Swanson is a volunteer Certified SCORE Mentor and former SCORE chapter chairman, district director and regional vice president for the North West Region.