What is a Business Plan?
It may seem almost counterintuitive, but the need to draft a business plan tends to be an obstacle for some. That's because many entrepreneurs lean toward the creative side and linear planning seems elusive and, frankly, unnecessary. Nothing could be further from the truth.
A business plan is simply a written articulation of your goals and strategies to bring a product or service to market. The document does not necessarily have to be a long, detailed step-by-step process. By that same token, there are sound reasons why a business plan must at least cover the broad strokes.
Why do I need a Business Plan?
According to the Small Business Administration, there are more than 33 million U.S. businesses employing more than 61 million Americans. Companies employing 100 people or fewer make up the lion's share. While those numbers seem inspiring, these sobering facts highlight a need for robust planning.
- Nearly two-thirds of small businesses start with $10,000 or less.
- About 25% start without financing.
- Only 40% of ventures turn a profit.
- More than 80% of businesses fail due to cash flow issues.
The stinging reality of taking a leap of faith into a business without a plan is that, more often than not, even the best ideas fail. One of the driving reasons is a failure to conduct reasonable research and to map out a strategy.
A business plan typically helps entrepreneurs navigate expected and unexpected market changes, reach incremental milestones, and secure funding based on a marriage of tangible data and revenue projections. The simple reason you need a business plan is to stay in business.
How do I write a Business Plan?
The first step to writing an effective business plan does not necessarily involve writing. It starts with conducting market research and analysis to ensure your concept is viable. Your document will then speak to what problem you plan to solve and the nuts and bolts of how your business will operate and who it will serve. Do the following before you start to draft your plan:
- Refine the idea: Take your loosely connected notes and thoughts and drill down until they become a singularly defined idea. General concepts like connecting people anytime and anywhere have led to social media companies that have defined a generation, but your idea doesn't need to be so grandiose. Look at your unique idea and the way you plan to solve specific problems, then hone it to a highly defined and marketable edge.
- Conduct market research and create a marketing plan: Who are your future customers and how will you reach them? Who are your competitors and what will you offer that is better than what they are offering for your target market? You must figure out who will need your products or services, the size and possibly even the location of that market, the competition already in that market, the competitive edge for your product or service, and how you plan to reach your potential customers to let them know about your business.
- Have a financial plan and know your financial limits: The hard data proves that underfunded ventures are more likely to fail. By understanding your available cash flow and anticipated expenditures, you can better predict when the tipping point into profitability might occur. Knowing your financial stability also helps to make informed decisions about business loans and investment capital.
- Consider company type: Your corporate structure makes a significant difference to potential investors and banks. For example, a sole proprietorship may give you certain industry agility, but an LLC or S-Corp may offer enhanced protections for investors. Rocket Lawyer can provide end-to-end Business Registration Services, including consultations with attorneys, at an affordable price. As you contemplate your business structure, you might also have ideas for your business name. Choosing the right name for your business is a project unto itself, requiring both research and the possible need for Trademark Registration Services.
- Think about product or service pricing: It's essential to understand that you must bring a product or service to market that delivers an enhanced benefit to consumers. This means giving people what they want with greater value than they are already getting. The pricing must entice consumers based on their perception, not necessarily yours. If you plan to launch a product, it's also critical to get legal support to protect your intellectual property rights.
Consider these issues before writing your business plan. There's no wrong way to create a document unless you plan to share your business plan with lending institutions or potential investors. If you want to secure a business loan, line of credit, or bring in investment capital, it would be wise to leverage a suitable business plan form, such as the Rocket Lawyer Business Plan, which is customizable and walks you through every step, with access to Rocket Lawyer network attorneys to answer your questions as you complete your plan.
What should I include in my Business Plan?
A business plan does not need to be hundreds of pages long, but it must include the salient points and articulate a strategy that leads to success. These are the types of information lenders and investors might expect in your business plan.
- Executive Summary.
- Company Overview.
- Detailed Information on Products and Services.
- Viable Marketing Plan.
- List of Business Accomplishments (Optional).
- Biographies and Duties of Key Staff Members.
- Financial Plan.
Writing a business plan involves taking all of your knowledge and expertise and distilling it down to a document that speaks volumes about how and why your company will be successful. If you have any unanswered questions or are unsure about a business plan element, consult with a Rocket Lawyer network attorney today.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
