What do I need to do before writing a Business Plan?
Starting a Business Plan is the first step to starting a business. All you need to start writing a Business Plan is the desire to start a business. If you know you want to start a business, but do not know what kind of business, starting a plan can even help you figure out what kind of business to start.
You might want to consider that many businesses thrive by finding a new way to solve a problem. That could just be feeding people in a location that people want. Or, it could be something huge, like sending space drones to the moon to collect moon rocks to sell here on Earth. If you already have your business idea, you may still want to consider how you will differentiate yourself from the competition. Also, keeping your customer's needs at the core of the Business Plan can help drive all other business decisions.
For example, fast food restaurants satisfy the need for fast food for busy people on the go. Everything, from the menu, location, and layout, is planned and built around speed of service. On the other hand, traditional restaurants may focus on a more specialized dining experience that values quality and ambiance over speed. A Business Plan can call out these details and help refine the ideas into actionable steps.
How do I come up with an idea?
Thinking up a business idea often involves identifying a problem to solve or a need to meet. This may seem hard at first, but with a little imagination, it is possible. Think about your own life and needs as a consumer, a parent, a driver, a worker, or whatever else you do. Then, ask yourself, what problems or needs do you have that are great enough that you would be willing to pay someone to solve them for you? You might walk through each step of your daily life, looking for things to improve.
Once you have found a need, you can ask your friends, family, and even strangers if they have a similar need in their life. Be sure to solicit honest feedback and take all of it into consideration. If your idea is something you do not want getting out there, you may want to consider requiring anyone you solicit feedback from to sign a Non-Disclosure Agreement.
What topics does a Business Plan cover?
After you have your idea, the next step is to begin building the plan to make it happen. A good Business Plan typically consists of five core components. Each of these is described in detail below.
Executive summary
The executive summary is a basic introduction to your business. It usually contains no more than a few sentences. But it will explain what problem you are solving, how you plan to solve it, and why this is the best way to do so. For example, if you are starting a franchise house-cleaning service, a well-written executive summary might look like this:
More and more often, both parents in a family have full-time jobs. However, household chores must still be done. At XYZ Cleaning Service, we help busy, on-the-go families by taking care of the annoying everyday chores while everyone is away at work and school with the help of our trusted cleaning service franchisees. Our nationwide brand and strict training curriculum create a scalable business with a familiar name that families all over the country can trust.
Business summary
The business summary is a description that usually adds more specifics to the executive summary, supporting its claims with details and facts. The executive summary tells the reader what you are doing, and the business description tells them why you are doing it. It often also goes into more detail about what exactly your product or service is and why it is a unique idea.
Market analysis
To grow a successful business, the need you plan to meet usually must be big enough to support your business's size. In other words, there has to be enough customers who want your product in the area where you plan to run your business. The market analysis section is where you can show that these potential customers exist in the numbers you need to succeed.
A large part of any market analysis should include a section on the competition. Even if you have the most unique idea in the world, you will likely still have to compete with other businesses to win customers. These other businesses are usually named in the market analysis. A competitor can be any person, business, or product that customers buy or hire to solve the same problem you are trying to solve.
Going back to our cleaning service example, competitors may not just be other cleaning services for homes, but also for commercial buildings and businesses. The competitive analysis part of a Business Plan usually lists specific competitors and explains how your solution is different or better.
Strategy and Implementation
After you have described who is likely to pay for your product or service and why, the strategy and implementation section explains how you will reach your goals and target customers. Topics you might add include pricing, marketing and ad plans, and where you plan to make sales. You may also wish to address both operational and growth strategies.
This section may also include an exit strategy. An exit strategy describes how the business will end, although that does not necessarily mean going out of business. An exit strategy may include selling the business to a new owner, passing it on to a family member, or even using an initial public offering (IPO) to go public.
Financial plan
To stay in business, a business typically must be able to generate enough revenue to cover costs and make a profit. When starting a new business, you may need to pay employees or other bills before you have made a profit or generated enough revenue.
This section is where you can describe how that will happen. It usually talks about the profit you expect to earn, the timeline to profitability, and how each sale will contribute. It may also include plans for seeking loans, other financing, or investment.
How do I figure out the right legal and organizational structure?
One of the final steps in creating a Business Plan is usually deciding how to organize your business legally. This is often where the rubber meets the road because the business structure can decide the first steps you take after your Business Plan is complete.
Structuring a business involves several decisions, including:
- Legal entity choice: A lawyer can help you figure out if a sole proprietorship, corporation or limited liability company is right for your business.
- Management structure: Who is in charge of day-to-day operations and how you will make important decisions.
- What employee roles need to be filled first and how you plan to fill them.
What should I do after I write my Business Plan?
After you finish your first draft of your Business Plan, you may want to take stock of your current team and think about what the next steps are to start the business. For example, you might have firsthand industry experience in sales, but not logistics. The idea is to identify what you and your current team already have covered, and where you will need help.
You may want to start a to-do list and identify who you will seek help from. A smart first step may include seeking a legal consultation, or reaching out to a Rocket Lawyer network attorney to get your Business Plan and to-dos reviewed. There may be legal requirements to get started, such as obtaining a business license or permit, a federal Employer Identification Number, and more. Since each business is unique, the first steps after creating a plan will vary. After seeking input on your plan, or creating your to-do list, you may find that your plan needs to change.
A Business Plan can change and grow as you learn more about your market, location, industry, competitors, and customers. It can change the day before your grand opening, or after you have been in business for years. But starting off with a strong plan and the right support can keep you on track and keep your eyes on the prize.
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.
